Callaway 2012 Annual Report Download - page 84

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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-related accessories such as golf bags, golf
gloves, 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 approximately 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
websites shop.callawaygolf.com and www.odysseygolf.com. In addition, the Company licenses its name for golf
apparel and footwear, rangefinders and practice aids.
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 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 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.
Revenue Recognition
Sales are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 605, “Revenue
Recognition,” as products are shipped to customers, net of an allowance for sales returns and sales programs. The
criteria for recognition of revenue are met when persuasive evidence that an arrangement exists and both title and
risk of loss have passed to the customer, the price is fixed or determinable and collectability is reasonably
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