Callaway 2014 Annual Report Download - page 77

F-9
remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service
period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that
ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest
in the award if the performance target is achieved. This ASU is effective for annual periods and interim periods within those
annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating the
impact this ASU will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers: (Topic 606)." This ASU
affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the
transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease
contracts). This ASU will supersede the revenue recognition requirements in Topic 605, "Revenue Recognition," and most
industry-specific guidance. In addition, the existing requirements for the recognition of a gain or loss on the transfer of
nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of Topic 360, "Property, Plant, and
Equipment," and intangible assets within the scope of Topic 350, "Intangibles-Goodwill and Other") are amended to be
consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. The core
principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016,
including interim periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating
the impact this ASU will have on its consolidated financial statements.
Revenue Recognition
Sales are recognized, in general, as products are shipped to customers, net of an allowance for sales returns and sales
programs in accordance with Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” In certain cases,
the Company recognizes sales when products are received by customers. 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,
2014 2013 2012
(In thousands)
Beginning balance .......................................................................................................... $ 7,334 $ 6,383 $ 6,521
Provision....................................................................................................................... 36,980 32,127 32,425
Sales returns ................................................................................................................. (35,370)(31,176)(32,563)
Ending balance................................................................................................................ $ 8,944 $ 7,334 $ 6,383
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 increased to $1,082,000 at December 31, 2014 from $999,000 at December 31, 2013.
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 the
devices are 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 $1,389,000 and $1,807,000 at December 31, 2014 and 2013,
respectively. The amounts are recorded in accounts payable and accrued expenses on the accompanying consolidated balance
sheets.