Mattel 2002 Annual Report Download - page 62

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condition, historical collection experience, accounts receivable aging and customer disputes to determine whether
collectibility is reasonably assured. If collectibility is not considered reasonably assured at the time of sale,
Mattel does not recognize revenue until collection occurs. Accruals for customer discounts and rebates, and
defective returns are recorded as the related revenue is recognized.
Advertising and Promotion Costs
Costs of media advertising are expensed the first time the advertising takes place, except for direct-response
advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response
advertising consists primarily of catalog production and mailing costs that are generally amortized within three
months from the date catalogs are mailed.
In the first quarter of 2002, Mattel implemented EITF Issue No. 01-09, Accounting for Consideration Given
by a Vendor to a Customer. Net sales, gross profit, and advertising and promotion expenses have been restated in
the consolidated statements of operations for 2001 and 2000 to reflect the reclassification of sales incentives or
certain consideration offered by Mattel to its customers as a result of implementing this EITF Issue.
Research and Development Costs
Research and development costs are charged to the results of operations when incurred.
Stock-Based Compensation
Mattel has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based
Compensation. Accordingly, no compensation cost has been recognized in the results of operations for
nonqualified stock options granted under Mattel’s plans as such options are granted at not less than the quoted
market price of Mattel’s common stock on the date of grant. Had compensation cost for nonqualified stock
options been determined based on their fair value at the date of grant consistent with the method of accounting
prescribed by SFAS No. 123, Mattel’s net income (loss) and earnings per share would have been adjusted as
follows (amounts in millions, except per share data):
For the Year Ended
2002 2001 2000
Net income (loss)
As reported ...................................................... $230.1 $298.9 $(431.0)
Stockoptionplans................................................. (19.3) (14.9) (34.6)
Proformaincome(loss) ........................................ $210.8 $284.0 $(465.6)
Income (loss) per share
Basic
As reported ...................................................... $ 0.52 $ 0.69 $ (1.01)
Stockoptionplans................................................. (0.04) (0.03) (0.08)
Pro forma basic income (loss) ................................... $ 0.48 $ 0.66 $ (1.09)
Diluted
As reported ...................................................... $ 0.52 $ 0.68 $ (1.01)
Stockoptionplans................................................. (0.04) (0.03) (0.08)
Proformadilutedincome(loss) .................................. $ 0.48 $ 0.65 $ (1.09)
The pro forma amounts shown above are not indicative of the pro forma effect in future years since the
estimated fair value of options is amortized to expense over the vesting period, and the number of options
granted varies from year to year.
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