World Fuel Services 2005 Annual Report Download - page 58

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The pro forma results of operations for 2004 reflect Tramp Oil’s net loss of $0.7 million for the three
months ended March 31, 2004, which includes the recording of charges incurred by Tramp Oil in connection
with the sale of the company.
Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements and related notes to the consolidated financial
statements include our accounts and those of our majority owned or controlled subsidiaries, after elimination of
all significant intercompany accounts, transactions, and profits.
Our wholly-owned subsidiary, Marine Energy Arabia Establishment Ltd., a British Virgin Islands (“BVI”)
corporation, owns 49% of Marine Energy Arabia Co, LLC, a United Arab Emirates (“Dubai”) corporation. In
accordance with local laws, the Dubai entity is 51% owned by a Dubai citizen, referred to as a Sponsor. The
Dubai company, pursuant to a management contract, is required to pay for the staff and administrative support
provided by the BVI entity. Our BVI subsidiary has entered into various agreements with the Dubai Sponsor to
prevent an unauthorized ownership transfer and to effectively grant majority control of the Dubai entity to our
BVI subsidiary. Accordingly, the financial position and operations of the Dubai entity have been included in our
consolidated financial statements.
Prior to January 2004, we used the equity method of accounting to record our share of the earnings and
losses of our PAFCO aviation joint venture. In addition, the amortized interest expense on the non-interest
bearing promissory note was also included in net earnings from the aviation joint venture. Effective January 1,
2004, with the implementation of the Financial Accounting Standard Board (“FASB”) Interpretation No. 46
(“FIN No. 46”), we consolidate PAFCO’s financial position and results of operations, after elimination of all
significant intercompany accounts, transactions and profits.
Cash and Cash Equivalents
On a daily basis, cash in excess of current operating requirements is invested in various highly liquid
securities typically having a maturity date of three months or less at the date of acquisition. These securities are
carried at cost, which approximates market value, and are classified as cash equivalents. Our cash equivalents
consist principally of bank repurchase agreements, bank money market accounts, bank time deposits, and
investment grade commercial paper.
Short-term Investments
Our short-term investments are carried at cost, which approximates market value, and consist of auction rate
securities. These securities are classified as available-for-sale, short-term investments based upon their expected
auction date (generally less than 30 days) rather than on their contractual obligation (which are greater than one
year at original issuance).
Accounts and Notes Receivable and Allowance for Bad Debts
Credit extension, monitoring and collection are performed by each of our business segments. Each segment
has a credit committee. The credit committees are responsible for approving credit limits above certain amounts,
setting and maintaining credit standards, and managing the overall quality of the credit portfolio. We perform
ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the
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