Callaway 2010 Annual Report Download - page 89

Long-Lived Assets
In accordance with ASC Topic 360-10-05, “Impairment or Disposal of Long-Lived Assets” (“ASC Topic
360-10-05”), 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.
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 ASC Topic 350, “Intangibles—Goodwill and Other,” 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
goodwill and other indefinite-lived intangible assets over their estimated fair value. If the carrying value exceeds
the estimate of fair value a write-down is recorded. To determine fair value, the Company uses its internal cash
flow estimates discounted at an appropriate rate, quoted market prices, royalty rates when available and
independent appraisals when appropriate. During the fourth quarter of 2010, the Company completed its annual
impairment test and fair value analysis of goodwill and other indefinite-lived intangible assets held throughout
the year. As a result, the Company identified a pre-tax impairment charge of $7,547,000 related to trade names,
trademarks and other intangible assets the Company acquired in 2003 as part of the acquisition of the assets of
TFGC Estate, Inc. (f/k/a the Top-Flite Golf Company) (see Note 9).
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 ASC Topic 360-10-05 discussed above. See Note 9 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. Investments that do not have readily determinable fair
values are stated at cost and are reported in other assets.
The Company monitors investments for impairment in accordance with ASC Topic 325-35-2, “Impairment”
and ASC Topic 320-35-17 through 35-35, “Scope of Impairment Guidance.” See Note 5 for further discussion of
the Company’s investments.
Share-Based Compensation
The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718,
“Compensation—Stock Compensation” (“ASC Topic 718”),” which requires the measurement and recognition
of compensation expense for all share-based payment awards to employees and directors based on estimated fair
values. ASC Topic 718 further requires a reduction in share-based compensation expense by an estimated
forfeiture rate. The forfeiture rate used by the Company is based on historical forfeiture trends. If actual
forfeiture rates are not consistent with the Company’s estimates, the Company may be required to increase or
decrease compensation expenses in future periods.
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