Callaway 2008 Annual Report Download - page 84

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 flows expected to result from the use and eventual disposition of the asset or asset group. Based on the
Company’s assessment of potential impairments during 2008, 2007 and 2006, there were no indicators identified
that would warrant an impairment of its long-lived assets.
Goodwill and Intangible Assets
Goodwill and intangible assets consist of goodwill, trade names, trademarks, service marks, trade dress,
patents and other intangible assets acquired during the acquisition of Odyssey Sports, Inc., the Top-Flite assets,
FrogTrader, Inc., the Tour Golf Group assets, the uPlay, LLC assets and certain foreign distributors.
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and intangible assets
with indefinite lives are not amortized but instead are measured for impairment at least annually, or when events
indicate that an impairment exists. The Company calculates impairment as the excess of the carrying value of its
indefinite-lived intangible assets over their estimated fair value. If the carrying value exceeds the estimate of fair
value a write-down is recorded.
Intangible assets that are determined to have definite lives are amortized over their estimated useful lives
and are measured for impairment only when events or circumstances indicate the carrying value may be impaired
in accordance with SFAS No. 144 discussed above. See Note 7 for further discussion of the Company’s goodwill
and intangible assets.
Investments
The Company determines the appropriate classification of its investments at the time of acquisition and
reevaluates such determination at each balance sheet date. Trading securities are carried at quoted fair value, with
unrealized gains and losses included in earnings. Available-for-sale securities are carried at quoted fair value,
with unrealized gains and losses reported in shareholders’ equity as a component of accumulated other
comprehensive income. Other investments that do not have readily determinable fair values are stated at cost and
are reported in other assets. Realized gains and losses are determined using the specific identification method and
are included in interest and other income, net.
The Company monitors investments for impairment in accordance with Accounting Principles Board
(“APB”) Opinion No. 18 “The Equity Method of Accounting for Investments in Common Stock” and Emerging
Issues Task Force No. 03-1 “The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments.” See Note 3 for further discussion of the Company’s investments.
Share-Based Compensation
The Company accounts for its share-based compensation arrangements in accordance with the provisions of
SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”), which requires the measurement and recognition
of compensation expense for all share-based payment awards to employees and directors based on estimated fair
values. The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock
options at the date of grant. The Black-Scholes option valuation model requires the input of subjective
assumptions to calculate the value of stock options. The Company uses historical data among other information
to estimate the expected price volatility, option life, dividend yield and forfeiture rate. The risk-free rate is based
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