Callaway 2011 Annual Report Download - page 81

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 www.shop.callawaygolf.com. In addition, the
Company licenses its name for golf apparel, 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 and investments. 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.
Recent Accounting Standards
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.”
This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of
its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-11
will be applied retrospectively and is effective for annual and interim reporting periods beginning on or after
January 1, 2013. The adoption of this amendment will not have a material impact on the Company’s disclosures
to the consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (Topic 350):
Testing Goodwill for Impairment.” This ASU is intended to simplify how entities, both public and nonpublic, test
goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it
is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350,
“Intangibles-Goodwill and Other.” The more-likely-than-not threshold is defined as having a likelihood of more
than 50%. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years
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