Callaway 2009 Annual Report Download - page 89

compensation expense is recognized on a straight-line basis over the performance period, reduced by an
estimated forfeiture rate. The Company uses forecasted performance metrics to estimate the number of
Performance Share Units to be issued. The Company’s performance against the specified performance targets is
reviewed quarterly and expense is adjusted as the Company’s actual and forecasted performance changes.
Income Taxes
Current income tax expense or benefit is the amount of income taxes expected to be payable or receivable
for the current year. A deferred income tax asset or liability is established for the difference between the tax basis
of an asset or liability computed pursuant to ASC Topic 740, “Accounting for Income Taxes,” and its reported
amount in the financial statements that will result in taxable or deductible amounts in future years when the
reported amount of the asset or liability is recovered or settled, respectively. Deferred income tax expense or
benefit is the net change during the year in the deferred income tax asset or liability.
Effective January 1, 2007, pursuant to ASC Topic 740-25-6, the Company is required to accrue for the
estimated additional amount of taxes for uncertain tax positions if it is more likely than not that the Company
will be required to pay such additional taxes. An uncertain income tax position will not be recognized if it has
less than 50% likelihood of being sustained. In connection with the adoption of ASC Topic 740-25-6 in 2007, the
Company recognized an increase in the liability for its uncertain tax positions of $437,000, of which the entire
charge was accounted for as a decrease to the beginning balance of retained earnings. The accrual for uncertain
tax positions can result in a difference between the estimated benefit recorded in the Company’s financial
statements and the benefit taken or expected to be taken in the Company’s income tax returns. This difference is
generally referred to as an “unrecognized tax benefit.”
Deferred taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries
since such amounts are expected to be reinvested indefinitely. The Company provides a valuation allowance for
its deferred tax assets when, in the opinion of management, it is more likely than not that such assets will not be
realized (see Note 15).
Interest and Other Income, Net
Interest and other income, net primarily includes gains and losses on foreign currency transactions, interest
income, and gains and losses on investments to fund the deferred compensation plan. The components of interest
and other income, net are as follows:
Year Ended December 31,
2009 2008 2007
(In thousands)
Foreign currency (losses) gains .......................................... $ (482) $ 519 $ 158
Interest income ....................................................... 1,807 2,312 2,202
Gains (losses) on deferred compensation plan assets .......................... 867 (1,925) 496
Other ............................................................... 493 957 599
$2,685 $ 1,863 $3,455
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) for the Company include net income
and foreign currency translation adjustments. Since the Company has met the indefinite reversal criteria, it does
not accrue income taxes on foreign currency translation adjustments. The total equity adjustment from foreign
currency translation included in accumulated other comprehensive income (loss) was income of $6,240,000 and
loss of $6,376,000 as of December 31, 2009 and 2008, respectively.
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