Mattel 2001 Annual Report Download - page 41

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not that Mattel will generate sufficient taxable income in the appropriate carryforward periods to realize the
benefit of its remaining net deferred tax assets. However, if the available evidence were to change in the future,
an adjustment to the valuation allowances may be required.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 141, Business
Combinations, which supercedes Accounting Principles Board Opinion (‘‘APB’’) No. 16, Business
Combinations. This statement requires that all business combinations be accounted for by the purchase method
and establishes specific criteria for the recognition of intangible assets separately from goodwill. The statement
also requires unallocated negative goodwill to be written off immediately as an extraordinary gain. The
provisions of the statement apply to business combinations initiated after June 30, 2001. For business
combinations accounted for using the purchase method before July 1, 2001, the provisions of this statement
will be effective in the first quarter of 2002. Mattel does not expect that the adoption of SFAS No. 141 will
have a material effect on its consolidated financial position or results of operations.
In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which supercedes
APB Opinion No. 17, Intangible Assets. This statement addresses the accounting and reporting of goodwill and
other intangible assets subsequent to their acquisition. The statement also provides specific guidance on testing
goodwill and intangible assets for impairment. SFAS No. 142 provides that (i) goodwill and indefinite-lived
intangible assets will no longer be amortized; (ii) impairment will be measured using various valuation
techniques based on discounted cash flows; (iii) goodwill will be tested for impairment at least annually at the
reporting unit level; (iv) intangible assets deemed to have an indefinite life will be tested for impairment at
least annually; and (v) intangible assets with finite lives will be amortized over their useful lives. Goodwill and
intangible assets acquired after June 30, 2001 were subjected to the provisions of this statement. All provisions
of this statement will be effective in the first quarter of 2002. Mattel’s goodwill amortization was approximately
$46 million of the total $51.1 million in amortization of intangibles recorded in 2001. Mattel is in the process
of evaluating the potential impact that the adoption of SFAS No. 142 will have on its consolidated financial
position and results of operations. Based on preliminary results of its valuation study, Mattel anticipates that the
total impairment to be recognized as a result of the transitional goodwill impairment test will be approximately
$400 million pretax, relating entirely to the Pleasant Company reporting unit.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair
value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. All provisions of this statement will be effective at the beginning of fiscal 2003. Mattel is in
the process of determining the impact of this statement on its financial results when effective.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets. This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of and amends APB No. 30, Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This
statement requires that long-lived assets that are to be disposed of by sale be measured at the lower of book
value or fair value less costs to sell. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for
(a) recognition and measurement of the impairment of long-lived assets to be held and used and
(b) measurement of long-lived assets to be disposed of by sale. This statement also retains APB No. 30’s
requirement that companies report discontinued operations separately from continuing operations. All
provisions of this statement will be effective in the first quarter of 2002. The adoption of this standard is not
expected to have a significant impact on Mattel’s consolidated financial position and results of operations.
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