Callaway 2008 Annual Report Download - page 110

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Note 16. Fair Value of Financial Instruments
The Company adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) as of January 1,
2008. SFAS No. 157 applies to certain assets and liabilities that are being measured and reported on a fair value
basis. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles, and expands disclosure about fair value measurements. SFAS No. 157
enables the reader of the financial statements to assess the inputs used to develop those measurements by
establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.
SFAS No. 157 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the
following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table summarizes the valuation of the Company’s derivative instruments by the above SFAS
No. 157 pricing levels as of the valuation dates listed (in thousands):
December 31, 2008 December 31, 2007
Carrying
Value
Observable
market based
inputs
(Level 2)
Carrying
Value
Observable
market based
inputs
(Level 2)
Derivative instruments—liability position ................. $2,007 $2,007 $421 $421
The fair value of the Company’s foreign currency exchange contracts is determined based on observable
inputs that are corroborated by market data. All derivatives on the balance sheet are recorded at fair value with
changes in fair value recorded in the statement of operations.
Note 17. Segment Information
The Company’s operating segments are organized on the basis of products and include golf clubs and golf
balls. The golf clubs segment consists primarily of Callaway Golf, Top-Flite and Ben Hogan woods, hybrids,
irons, wedges and putters as well as Odyssey putters, other golf-related accessories and royalties from licensing
of the Company’s trademarks and service marks. The golf balls segment consists primarily of Callaway Golf and
Top-Flite golf balls that are designed, manufactured and sold by the Company. There are no significant
intersegment transactions.
F-36