Mattel 2014 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2014 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 134

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134

fluctuations against the US dollar. From January 2010 through January 2013, Mattel’s Venezuelan subsidiary
used the Sistema de Transacciones con Titulos en Moneda Extranjera (“SITME”) rate, which was controlled by
the Central Bank of Venezuela, to remeasure monetary assets and liabilities denominated in BsF. The SITME
rate was quoted at 5.30 BsF per US dollar as of December 31, 2012.
During February 2013, the Central Bank of Venezuela revised its official exchange rate to 6.30 BsF per US
dollar and eliminated the SITME rate. Since February 2013, Mattel’s Venezuelan subsidiary has used the official
exchange rate as its remeasurement rate. The change in the exchange rate resulted in an unrealized foreign
currency exchange loss of approximately $5 million, which was primarily recognized within other non-operating
(income) expense, net in the consolidated statements of operations in the first quarter of 2013.
During March 2013, the Venezuelan government announced a complementary currency exchange system,
the Sistema Complementario de Administracion de Divisas 1 (“SICAD 1”). Participation in SICAD 1 is
controlled by the Venezuelan government. SICAD 1 is intended to function as an auction system, allowing
entities in specific sectors to bid for US dollars to be used for specified import transactions. During December
2013, the government regulation that created SICAD 1 was amended to expand its use and to require publication
of the average exchange rate implied by transactions settled in SICAD 1 auctions. In January 2014, the
Venezuelan government announced a new foreign currency administration body, the National Center for Foreign
Commerce (“CENCOEX”), which approves certain transactions at the official rate.
During February 2014, the Venezuelan government created a third currency exchange system called the
Sistema Complementario de Administracion de Divisas 2 (“SICAD 2”), which was expected to provide a greater
supply of US dollars from sources other than the Venezuelan government, is expected to allow all sectors and
companies to participate, and is expected to permit US dollars to be offered in cash or bonds. Foreign exchange
transactions in SICAD 2 will be regulated by the Central Bank of Venezuela and administered by registered
banks, brokerage firms, and exchange houses that have been authorized by the Central Bank of Venezuela.
Mattel was not eligible to access US dollars in Venezuela through SICAD 1. Based on a number of factors,
including the restrictions placed on eligible participants, the amount of US dollars available to purchase through
the auction process, and the ineligibility of past import transactions to be settled through SICAD 1, Mattel does
not believe it was appropriate to use the SICAD 1 rate as its remeasurement rate as of December 31, 2014.
However, had Mattel used the SICAD 1 rate of 12.00 BsF per US dollar as of December 31, 2014 as its
remeasurement rate, it would have recognized a pre-tax charge of approximately $10 million in its consolidated
statement of operations.
Mattel was not able to access US dollars in Venezuela through SICAD 2 due to the restrictions associated
with SICAD 2 and the limited access to the SICAD 2 system. As such, Mattel does not believe it was appropriate
to use the SICAD 2 rate as its remeasurement rate as of December 31, 2014. However, had Mattel used the
SICAD 2 rate of 49.99 BsF per US dollar as of December 31, 2014 as its remeasurement rate, it would have
recognized a pre-tax charge of approximately $19 million in its consolidated statement of operations.
During February 2015, the Venezuelan government announced that it will launch a new three-tiered
currency exchange platform, which will include a new exchange system called the Marginal Currency System
(“SIMADI”). The first tier will be used for food, medicine, agriculture, and other essential goods and will use the
existing official exchange rate of 6.30 BsF per US dollar. The second tier will be a merger of the SICAD 1 and
SICAD 2 systems, which will continue to hold periodic auctions for entities in specific sectors. The third tier will
be the new SIMADI system, which is a market-driven exchange that will allow for legal trading of foreign
currency based on supply and demand. Mattel will monitor the accessibility of US dollars through the new
currency exchange platform and will assess the impact to its financial statements as additional information
becomes available.
56