Callaway 2004 Annual Report Download - page 75

CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed
using the straight-line method over estimated useful lives as follows:
Buildings and improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10-30 years
Machinery and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-15 years
Furniture, computers and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3-5 years
Production molds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 years
Normal repairs and maintenance costs are expensed as incurred. Expenditures that materially increase
values, change capacities or extend useful lives are capitalized. Replacements are capitalized and the property,
plant, and equipment accounts are relieved of the items being replaced. The related costs and accumulated
depreciation of disposed assets are eliminated and any resulting gain or loss on disposition is included in
income. Construction in-process consists primarily of store display equipment not yet assembled and installed,
in-process internally developed software and unÑnished molds that have not yet been placed in service.
In accordance with AICPA Statement of Position 98-1, ""Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use,'' the Company capitalizes certain costs incurred in connection with
developing or obtaining internal use software. Costs incurred in the preliminary project stage are expensed. All
direct external costs incurred to develop internal-use software during the development stage are capitalized
and amortized using the straight-line method over the remaining estimated useful lives. Costs such as
maintenance and training are expensed as incurred.
During the fourth quarter of 2003, in connection with the Top-Flite Acquisition (Note 3), the Company
began consolidating the Callaway Golf and Top-Flite golf club and golf ball manufacturing and research and
development operations. In connection with this consolidation, the Company disposed of certain long-lived
assets. As a result, the Company reduced the carrying value of its golf ball assets and therefore incurred pre-
tax charges to earnings in the amounts of $5,677,000 and $24,080,000 during 2004 and 2003, respectively.
Long-Lived Assets
In accordance with SFAS No. 144, ""Accounting for the Impairment or Disposal of Long-Lived Assets,''
the Company assesses potential impairments of its long-lived assets whenever events or changes in
circumstances indicate that the asset's carrying value may not be recoverable. An impairment loss would be
recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair
value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the
undiscounted cash Öows expected to result from the use and eventual disposition of the asset or asset group.
Goodwill and Intangible Assets
Goodwill and intangible assets consist of goodwill, trade name, trademark, trade dress, patents and other
intangible assets acquired during the acquisition of FrogTrader, Inc., Odyssey Sports, Inc., Top-Flite Golf
Company and certain foreign distributors. See Note 3, for further discussion of the intangible assets acquired
in connection with the FrogTrader and Top-Flite Acquisitions.
In June 2001, the FASB issued SFAS No. 142, ""Goodwill and Other Intangible Assets.'' Under
SFAS No. 142, acquired intangible assets must be separately identiÑed. Goodwill and other intangible assets
with indeÑnite lives are not amortized, but are reviewed at least annually for impairment. Acquired intangible
assets with deÑnite lives are amortized over their individual useful lives. In addition to goodwill, the
Company's intangible assets with indeÑnite lives consist of trade name, trademark and trade dress. In
accordance with SFAS No. 142, the goodwill and other intangible assets with indeÑnite lives that were being
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