Adidas 2000 Annual Report Download - page 74

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Research and Development
Research costs are expensed as incurred. Development costs
are also expensed as incurred and are not capitalized due to
the short product life cycle of sporting goods.
The Company spent approximately c 91 million and c 77 million
on product research and development for the years ended
December 31, 2000 and 1999, respectively.
Liabilities
Liabilities are accrued at their settlement amount.
Provisions
Provisions are recognized where a present – legal or construc-
tive – obligation has been incurred which will probably lead to
an outflow of resources which can be reasonably estimated.
Pensions and Similar Obligations
Provisions for pensions and similar obligations comprise the
provision obligation of the Company under defined benefit and
contribution plans. The obligation under defined benefit plans is
determined using the projected unit credit method in accordance
with IAS 19 (revised 1998).
Recognition of Revenues
Revenues are recognized when title passes based on the terms
of the sale. Sales are recorded net of returns, discounts, allow-
ances and sales taxes.
Advertising and Promotional Expenditures
Production costs for media campaigns are shown under pre-
paid expenses until the advertising takes place for the first time,
after which they are expensed in full. Significant media buying
costs (e.g. broadcasting fees) are expensed over the original
duration of the campaign on a straight-line basis.
Promotional expenses, including one-time upfront payments for
promotional contracts, are generally expensed pro rata over the
term of the agreement.
Interest
Interest is recognized as an expense as incurred.
Income Taxes
Current income taxes are computed in accordance with the
rules for taxation established in the countries in which the
Company operates.
The Company computes deferred taxes for all temporary
differences between the carrying amount and the tax basis
of its assets and liabilities and tax loss carryforwards.
Deferred tax assets arising from deductible temporary differences
and tax loss carryforwards which exceed taxable temporary
differences are only recognized to the extent that it is probable
that the company concerned will generate sufficient taxable
income to realize the associated benefit.
Derivative Financial Instruments
Until the end of December 31, 2000, exchange gains and losses
on outstanding forward currency contracts and currency options
which hedge anticipated future transactions are deferred and
recognized in income when the underlying transaction takes
place. Exchange gains and losses on forward contracts and
currency options which are discontinued or no longer serve as
a hedge for an anticipated future transaction are charged to
income as incurred.
Interest rate cap premiums are amortized over the useful life
of the caps. Amortized cap premiums are included in interest
expenses, as part of the financial result.