Nautilus 2005 Annual Report Download - page 47

Table of Contents
Trade Receivables –
The Company maintains an allowance for doubtful accounts receivable based upon our historical experience and the
expected collectibility of all outstanding accounts receivable. Allowance for doubtful accounts receivable activity for the years ended
December 31, 2005, 2004 and 2003 is as follows:
Inventories are stated at the lower of standard cost (standard or average, depending on location) or market. The Company evaluates the
need for inventory valuation adjustments associated with obsolete, slow-moving and nonsaleable inventory by reviewing current transactions
and forecasted product demand on a quarterly basis.
Asset Held for Sale consists entirely of the previous Company headquarters stated at net book value. The building was sold in February
2006 for approximately book value.
Property, Plant and Equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives
of the assets.
Management reviews the investment in long-lived assets for possible impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable. There have been no such events or circumstances in each of the three years in the period ended
December 31, 2005. If there were an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and
without interest charges) expected to result from the use of the assets and their eventual disposition. If these cash flows were less than the
carrying amount of the assets, an impairment loss would be recognized to write down the assets to their estimated fair value.
Goodwill and Other Assets consist of license agreements, patents, trademarks and goodwill. Long-lived and intangible assets that are
determined to have finite lives are amortized using the straight-line method over their estimated useful lives of two to twenty years and are
measured for impairment only when events or circumstances indicate the carrying value may be impaired. In these cases, the Company
estimates the future undiscounted cash flows to be derived from the asset to determine whether a potential impairment exists. If the carrying
value exceeds the estimate of future undiscounted cash flows, the Company then calculates the impairment as the excess of the carrying value
of the asset over the estimate of its fair value.
Certain intangible assets with indefinite useful lives are evaluated for impairment at least annually. The remaining useful lives of
intangible assets with finite useful lives are evaluated at least annually. The Company reviews and tests its goodwill and intangible assets for
impairment in the fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount of such assets
may be impaired. Determination of fair value is based on estimated discounted future cash flows resulting from the use of the asset. The
Company compares the implied fair value of goodwill and the estimated fair value of intangible assets to the carrying value. If the carrying
value exceeds the estimate of fair value, the Company calculates impairment as the excess of the carrying value over the estimated fair value.
The estimates of the fair value of goodwill and indefinite-lived intangible assets are based on a number of factors, including assumptions and
estimates for projected sales, income, cash flows, and other operating performance measures. These assumptions and estimates may change in
the future due to changes in economic conditions, in the Company’s ability to meet sales and profitability objectives, or changes in the
Company’s business operations or strategic direction.
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Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions*
Balance at
End of
Period
Allowance for doubtful accounts:
2005
$
3,252
$
1,874
$
1,041
$
4,085
2004
2,686
985
419
3,252
2003
3,147
388
849
2,686
*
Deductions represent amounts written off against the allowance, net of recoveries.