WeightWatchers 2002 Annual Report Download - page 57

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. Summary of Significant Accounting Policies (Continued)
during the reporting period. On an on going basis, the Company evaluates its estimates and judgments,
including those related to customer programs and incentives, inventories, investments, intangible assets,
income taxes, financing operations, restructuring costs, and contingencies and litigation. The Company
bases its estimates on historical experience and on various other factors and assumptions that the
Company believes to be reasonable under the circumstances, the results of which form the bases for
making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual amounts could differ from these estimates.
Translation of Foreign Currencies:
For all foreign operations, the functional currency is the local currency. Assets and liabilities of
these operations are translated at the exchange rate in effect at each year-end. Income statement
accounts are translated at the average rate of exchange prevailing during the year. Translation
adjustments arising from the use of differing exchange rates from period to period are included in
accumulated other comprehensive income (loss).
Cash Equivalents:
Cash and cash equivalents are defined as highly liquid investments with original maturities of three
months or less. Cash balances may, at times, exceed insurable amounts. The Company believes it
mitigates this risk by investing in or through major financial institutions.
Inventories:
Inventories, which consist of finished goods, are stated at the lower of cost or market on a first-in,
first-out basis, net of reserves for obsolescence and shrinkage.
Property and Equipment:
Property and equipment are recorded at cost. For financial reporting purposes, equipment is
depreciated on the straight-line method over the estimated useful lives of the assets (5 to 10 years).
Leasehold improvements are amortized on the straight-line method over the shorter of the term of the
lease or the useful life of the related assets (5 to 10 years). Expenditures for new facilities and
improvements that substantially extend the useful life of an asset are capitalized. Ordinary repairs and
maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the cost and
related depreciation are removed from the accounts and any related gains or losses are included in
income.
Impairment of Long Lived Assets:
The Company reviews long-lived assets, including amortizable intangible assets, for impairment
whenever events or changes in business circumstances indicate that the carrying amount of the assets
may not be fully recoverable.
Effective December 30, 2001, the Company adopted Statement of Financial Accounting Standard
(‘‘SFAS’’) No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets,’’ which replaces
SFAS No. 121, ‘‘Accounting for the Impairment of Long-Lived Assets to be Disposed of’’. SFAS
F-8