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Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
combined weighted average number of common shares and common share equivalents outstanding which include, where appropriate, the
assumed exercise or conversion of options and warrants. In computing diluted earnings (loss) per share, the Company has utilized the
treasury stock method.
New Accounting Pronouncements
As of January 1, 2003, the Company adopted Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor.” See Note 1, Summary of Significant Accounting Policies —
Cumulative Effect of Accounting Change, for additional discussion.
In June 2001, the FASB issued SFAS 143, “Accounting for Asset Retirement Obligations,” effective for fiscal years beginning after
June 15, 2002. SFAS 143 requires that entities record the fair value of an asset retirement obligation in the period in which it was incurred.
The adoption of SFAS 143 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.
In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires the
recognition of a liability for certain guarantee obligations issued or modified after December 31, 2002. FIN 45 also clarifies disclosure
requirements to be made by a guarantor for certain guarantees. The disclosure provisions of FIN 45 were effective for fiscal years ending after
December 15, 2002. The Company adopted the disclosure provisions of FIN 45 as of December 31, 2002 and has adopted the accounting
requirements effective January 1, 2003, which did not have a material impact on its consolidated financial position, results of operations or
cash flows. See Note 16, Discontinued Operations, for discussion of the accounting treatment of potential future guarantees.
In November 2002, the EITF reached a consensus on EITF Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple
Deliverables.” EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple
products, services and/or rights to use assets. The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The adoption of EITF 00-21 did not have an impact on the Company’s consolidated financial position, results
of operations or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46 “Consolidation of Variable Interest Entities, an Interpretation of APB
No. 50,” (“FIN 46”). FIN 46 requires certain variable interest entities, as defined, to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial support from other parties. FIN 46, as amended, is effective for all new
variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003,
the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003. In December 2003, the
FASB issued a revision to FIN 46 (“FIN 46R”) to clarify some of the provisions of the interpretation and defer the implementation date for
certain entities to periods ending after March 14, 2004. The adoption of FIN 46 and FIN 46R are not expected to have an impact on the
Company’s consolidated financial position, results of operations or cash flows.
In April 2003, the FASB issued SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149
clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative and clarifies when a
derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 amends certain other
existing pronouncements. SFAS 149 is generally effective for contracts entered into or modified after June 30,
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