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F-9
after December 15, 2013. Early adoption is permitted. Based on the Company's evaluation, this ASU will not have a
material impact on its consolidated condensed financial statements.
In December 2011, the FASB issued 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 did 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 assured. Sales returns are
estimated based upon historical returns, current economic trends, changes in customer demands and sell-through of
products. The Company also records estimated reductions to revenue for sales programs such as incentive offerings. Sales
program accruals are estimated based upon the attributes of the sales program, management’s forecast of future product
demand, and historical customer participation in similar programs. The following table provides a reconciliation of the
activity related to the Company’s allowance for sales returns:
Years Ended December 31,
2013 2012 2011
(In thousands)
Beginning balance ......................................................................................................... $ 6,383 $ 6,521 $ 4,955
Provision ..................................................................................................................... 32,127 32,425 36,239
Sales returns ................................................................................................................ (31,176)(32,563)(34,673)
Ending balance .............................................................................................................. $ 7,334 $ 6,383 $ 6,521
Revenues from gift cards are deferred and recognized when the cards are redeemed. In addition, the Company
recognizes revenue from unredeemed gift cards when the likelihood of redemption becomes remote and under
circumstances that comply with any applicable state escheatment laws. The Company’s gift cards have no expiration. To
determine when redemption is remote, the Company analyzes an aging of unredeemed cards (based on the date the card
was last used or the activation date if the card has never been used) and compares that information with historical redemption
trends. The deferred revenue associated with outstanding gift cards decreased to $999,000 at December 31, 2013 from
$1,141,000 at December 31, 2012. The amounts are recorded in accounts payable and accrued expenses on the
accompanying consolidated balance sheets.
Revenues from course credits in connection with the use of the Company's uPro GPS devices are deferred when
purchased and recognized on a straight-line basis over their estimated useful life based on historical usage trends. Deferred
revenue associated with unused course credits was $1,807,000 and $2,544,000 at December 31, 2013 and 2012,
respectively. The amounts are recorded in accounts payable and accrued expenses on the accompanying consolidated
balance sheets.
Amounts billed to customers for shipping and handling are included in net sales and costs incurred related to shipping
and handling are included in cost of sales.
Royalty income is recorded in net sales as underlying product sales occur, subject to certain minimums, in accordance
with the related licensing arrangements. The Company recognized royalty income under its various licensing agreements
of $9,130,000, $7,073,000 and $6,219,000 during 2013, 2012 and 2011, respectively.
Warranty Policy
The Company has a stated two-year warranty policy for its golf clubs. The Company’s policy is to accrue the
estimated cost of satisfying future warranty claims at the time the sale is recorded. In estimating its future warranty
obligations, the Company considers various relevant factors, including the Company’s stated warranty policies and