Callaway 2003 Annual Report Download - page 54

CALLAWAY GOLF COMPANY 51
In January 2003, the FASB issued Interpretation (“FIN”) No.
46, “Consolidation of Variable Interest Entities” and in
December 2003, issued Interpretation No. 46 (revised
December 2003) “Consolidation of Variable Interest Entities —
An Interpretation of APB No. 51.” In general, a variable inter-
est entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does
not have equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for
the entity to support its activities. FIN No. 46 requires certain
variable interest entities to be consolidated by the primary
beneficiary of the entity if the 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 No. 46(R) clarifies the application of
Accounting Research Bulletin (“APB”) No. 51, “Consolidated
Financial Statements,” to certain entities in which equity
investors do not have the characteristics of a controlling finan-
cial interest or do not have sufficient equity at risk for the entity
to finance its activities without subordinated financial support
from other parties. The consolidation requirements of FIN No.
46 applies immediately to variable interest entities created
after January 31, 2003. The consolidation requirements apply
to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements
apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established.
FIN No. 46(R) applies immediately to variable interest entities
created after December 31, 2003, and to variable interest entities
in which an enterprise obtains an interest after that date. It
applies no later than the first reporting period ending after
December 15, 2004, to variable interest entities in which an
enterprise holds a variable interest (other than special pur-
pose) that it acquired before January 1, 2004. FIN No. 46(R)
applies to public enterprises as of the beginning of the appli-
cable interim or annual period. The Company believes that the
adoption of FIN No. 46 and FIN No. 46(R) has not had and
will not have a material impact on its financial position or
results of operations because the Company has no variable
interest entities.
In December 2002, the FASB issued SFAS No. 148,
“Accounting for Stock-Based Compensation — Transition and
Disclosure — an amendment of FASB Statement No. 123.”
SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-
Based Compensation,” to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of SFAS No.
123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-
based employee compensation and the effect of the method
used on reported results. The Company is required to follow
the prescribed disclosure format and has provided the
additional disclosures required by SFAS No. 148 for the year
ended December 31, 2003 (Note 2).
In November 2002, the FASB issued FIN No. 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others,” an
interpretation of FASB Statements No. 5, 57 and 107, and
rescission of FASB Interpretation No. 34, “Disclosure of Indirect
Guarantees of Indebtedness of Others.” FIN No. 45 elaborates
on the disclosures to be made by the guarantor in its interim
and annual financial statements about its obligations under
certain guarantees that it has issued. It also requires that a
guarantor recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions
of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002; while,
the provisions of the disclosure requirements are effective for
financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN No. 45 has not had a
material impact on the Company’s results of operations or
financial position.
In July 2002, the FASB issued SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities.” SFAS No. 146
requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. Examples of
such costs covered by the standard include lease termination
costs and certain employee severance costs associated with a