Callaway 2009 Annual Report Download - page 83

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CALLAWAY GOLF COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company
Callaway Golf Company (“Callaway Golf” or the “Company”), a Delaware corporation, together with its
subsidiaries, designs, manufactures and sells high quality golf clubs (drivers, fairway woods, hybrids, irons,
wedges and putters) and golf balls. The Company also sells golf accessories such as golf bags, golf gloves, golf
footwear, GPS on-course range finders, golf and lifestyle apparel, golf headwear, eyewear, golf towels and golf
umbrellas. The Company generally sells its products to golf retailers (including pro shops at golf courses and
off-course retailers), sporting goods retailers and mass merchants, directly and through its wholly-owned
subsidiaries, and to third-party distributors in the United States and in over 100 countries around the world. The
Company also sells pre-owned Callaway Golf products through its website, www.callawaygolfpreowned.com
and sells new Callaway Golf products through its website Shop.CallawayGolf.com as an alliance between the
Company and its network of authorized U.S. retailers. In addition, the Company licenses its name for golf and
lifestyle apparel, watches, travel gear and other golf accessories.
Note 2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its domestic
and foreign subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States (“GAAP”) requires management to make estimates and judgments that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances. Examples of such estimates include provisions for warranty, uncollectible accounts receivable,
inventory obsolescence, sales returns, tax contingencies, estimates on the valuation of share-based awards and
recoverability of long-lived assets. Actual results may materially differ from these estimates. On an ongoing
basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in its
business or as new information becomes available. The Company evaluated all subsequent events through the
time that it filed its consolidated financial statements in this Form 10-K with the Securities and Exchange
Commission.
Recently Adopted Accounting Standards
As of September 30, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC” or “Codification”) Topic 105, “Generally Accepted Accounting
Principles” (“ASC Topic 105”), formerly FASB Statement No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168”). ASC Topic
105 establishes the FASB Accounting Standards Codification as the single source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of the federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.
ASC Topic 105 and the Codification are effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Codification supersedes all existing non-SEC accounting and reporting
standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will
become non-authoritative. Following SFAS No. 168, the FASB will not issue new standards in the form of
F-7