Mattel 2003 Annual Report Download - page 64

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MATTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Preparation
The consolidated financial statements include the accounts of Mattel, Inc. and its subsidiaries (“Mattel”).
All majority-owned subsidiaries are consolidated and included in Mattel’s consolidated financial statements.
Investments in joint ventures and other companies are accounted for by the equity method or cost basis,
depending upon the level of the investment and/or Mattel’s ability to exercise influence over operating and
financial policies. Mattel does not have any minority stock ownership interests in which it has a controlling
financial interest that would require consolidation. All significant intercompany accounts and transactions have
been eliminated in consolidation, and certain amounts in the consolidated financial statements for prior years
have been reclassified to conform to the current year presentation.
As more fully described in Note 14, the Consumer Software segment, which was comprised primarily of
Learning Company, was reported as a discontinued operation effective March 31, 2000, and the consolidated
statements of operations were reclassified to segregate the operating results of the Consumer Software segment.
Use of Estimates
Preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could
ultimately differ from those estimates.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into US dollars at fiscal year-end exchange rates.
Income, expense, and cash flow items are translated at weighted average exchange rates prevailing during the
fiscal year. The resulting currency translation adjustments are recorded as a component of accumulated other
comprehensive loss within stockholders’ equity.
Mattel’s foreign currency transaction exposures include gains and losses realized on unhedged inventory
purchases and unhedged receivables and payables balances that are denominated in a currency other than the
applicable functional currency. Gains and losses on unhedged inventory purchases and other transactions
associated with operating activities are recorded in the components of operating income. Gains and losses on
unhedged intercompany loans and advances are recorded as a component of other non-operating (income)
expense, net in the period in which the currency exchange rate changes.
Cash and Short-Term Investments
Cash includes cash equivalents, which are highly liquid investments with maturities of three months or less
when purchased.
Marketable Securities
Marketable securities are comprised of investments in publicly-traded securities, classified as available-for-
sale, and are recorded at market value with unrealized gains or losses, net of tax, reported as a component of
accumulated other comprehensive loss within stockholders’ equity until realized.
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