Garmin 2005 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2005 Garmin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

60
Recently Issued Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in
SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an alternative.
SFAS No. 123(R) must be adopted for fiscal years beginning October 1, 2005 or later. Early adoptions will be
permitted in periods in which financial statements have not yet been issued. The Company will adopt SFAS
No. 123(R) on January 1, 2006.
SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:
A “modified prospective” method in which compensation cost is recognized beginning with the effective date
(a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and
(b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to effective date of SFAS
No. 123(R) that remain unvested as of the effective date.
A “modified retrospective” method which includes the requirements of the modified prospective described
above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for
purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of
adoption.
The Company will adopt SFAS No. 123(R) using the modified prospective method.
As permitted by SFAS No. 123, during the fiscal year ended December 31, 2005, the Company accounted for
share-based payments to employees using Opinion 25’s intrinsic value method. The impact of adoption of SFAS
No. 123(R) will depend on levels of share-based payments granted in the future. However, had we adopted SFAS
No. 123(R) in prior periods, the impact would have approximated the impact of SFAS No. 123 as described in the
disclosure of pro forma net income and earnings per share in Note 1. The adoption of SFAS No. 123(R)’s fair value
method is not expected to have a significant impact on our results of operations or on our overall financial position.
SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” amends the existing standard
that provides guidance on accounting for inventory costs and specifically clarifies that abnormal amounts of costs
should be recognized as period costs. This statement is effective for the fiscal year beginning after June 15, 2005.
The adoption of SFAS No. 151 is not expected to have a material effect on the Company’s consolidated financial
statements.
SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions” eliminates the narrow exception for nonmonetary exchanges of similar productive
assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial
substance. Further, the amendments made by SFAS No. 153 are based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets exchanged. Previously, Opinion No. 29
required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished.
The statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. Earlier application is permitted for nonmonetary asset exchanges in fiscal periods beginning after the date of
issuance. The provisions of this statement shall be applied prospectively. The adoption of SFAS No. 153 is not
expected to have a material effect on the Company’s consolidated financial statements.
SFAS No. 154, “Accounting Changes and Error Corrections” is a replacement of APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.
Statement 154 applies to all voluntary changes in accounting principle and changes the accounting for and a
reporting of a change in accounting principle. Statement 154 requires retrospective application to the prior periods’