Adidas 2001 Annual Report Download - page 76

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71
Consolidated Accounts
Other Liabilities
Other liabilities are recorded at their settlement amount.
Provisions
Provisions are recognized where a present, legal or constructive,
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 plans and defined con-
tribution plans. The obligation under defined benefit plans is determined
using the projected unit credit method in accordance with IAS 19
(revised 2000). The Company does not recognize actuarial gains or losses
of defined benefit plans as income and expenses according to the corridor
approach of IAS 19.92 (revised 2000) within the range of 10% of the
present value of the defined benefit obligation.
Recognition of Revenues
Sales are recorded net of returns, discounts, allowances and sales taxes
when title passes based on the terms of the sale.
Royalty income is recorded based on the terms of the contracts.
Advertising and Promotional Expenditures
Production costs for media campaigns are shown under prepaid 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 promo-
tional contracts, are expensed pro rata over the term of the agreement.
Interest
Interest is recognized as an expense or income 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.
Accounting for Stock Option Plans
Compensation costs for the difference between the exercise price and the
fair value of the shares or the intrinsic value of share options granted is
not recognized in the financial statements until the exercise of the options.
Use of Estimates
The preparation of financial statements in conformity with IAS requires
Management to make assumptions and estimates that affect reported
amounts and related disclosures. Actual results could differ from those
estimates.