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F-8
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 apparel and footwear, golf bags, golf
gloves, golf headwear, travel gear, eyewear, golf towels and 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 websites www.callawaygolf.com and
www.odysseygolf.com. In addition, the Company licenses its trademarks and service marks in exchange for a royalty fee
to third parties for use on golf related accessories including golf apparel and footwear, golf gloves, umbrellas, prescription
eyewear, 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 July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task
Force)." This ASU states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented
in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss,
or a tax credit carryforward, except in certain situations. This ASU is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2013. Early adoption and retrospective application are permitted. The
amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Based on the
Company's evaluation, this ASU will not have a material impact on its consolidated condensed financial statements.
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting
for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a
Foreign Entity or of an Investment in a Foreign Entity.” This ASU provides guidance on releasing cumulative translation
adjustments to net income when an entity ceases to have a controlling financial interest in a subsidiary or business within
a foreign entity. The cumulative translation adjustments should be released only if the sale or transfer results in the
complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resides.
This ASU is effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning