Mattel 2004 Annual Report Download - page 46

Proposed New Equity Compensation Plan
Mattel anticipates that, subject to approval by the Compensation Committee of the board of directors, a new
2005 Equity Compensation Plan will be presented to the stockholders of Mattel for their consideration at the
2005 Annual Meeting of Stockholders. The 2005 Equity Compensation Plan is expected to be an omnibus plan
providing for a variety of possible forms of equity compensation, which may include stock options (nonqualified
and/or incentive stock options), stock appreciation rights, nonvested stock (service- and/or performance-vesting),
nonvested stock units (service- and/or performance-vesting), shares of common stock (as bonuses or in lieu of
cash compensation) and dividend equivalent rights. Mattel anticipates that its 2005 Notice of Annual Meeting
and Proxy Statement will contain a proposal providing information about and asking the stockholders to approve
the 2005 Equity Compensation Plan.
Employee Savings Plan
Mattel sponsors a 401(k) savings plan, the Mattel Personal Investment Plan, for its domestic employees.
Mattel makes employer contributions in cash and allows employees to allocate both their own contributions and
employer contributions to a variety of investment funds, including a fund that is fully invested in Mattel common
stock (the “Mattel Stock Fund”). Employees are not required to allocate any funds to the Mattel Stock Fund,
which allows employees to limit or eliminate their exposure to market changes in Mattel’s stock price.
Furthermore, Mattel’s plan limits an employee’s allocation to the Mattel Stock Fund to 50% of the employee’s
total account balance. Employees may generally reallocate their account balances on a daily basis. The only
limitation on the frequency of reallocations applies to changes involving the Mattel Stock Fund by employees
classified as insiders or restricted personnel under Mattel’s insider trading policy. Pursuant to Mattel’s insider
trading policy, insiders and restricted personnel are limited to certain window periods for making allocations into
or out of the Mattel Stock Fund.
Application of Critical Accounting Policies
Mattel makes certain estimates and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses. The accounting policies described below are those Mattel
considers most critical in preparing its consolidated financial statements. Management has discussed the
development and selection of these critical accounting policies with the Audit Committee of its board of
directors, and the Audit Committee has reviewed the disclosures included below. The following is a review of the
accounting policies that include significant judgments made by management using information available at the
time the estimates are made. As described below, however, these estimates could change materially if different
information or assumptions were used instead.
Note 1 to the consolidated financial statements includes a summary of the significant accounting policies
and methods used in the preparation of Mattel’s consolidated financial statements. In most instances, Mattel must
use an accounting policy or method because it is the only policy or method permitted under accounting principles
generally accepted in the United States of America. See Item 8 “Financial Statements and Supplementary Data—
Note 1 to the Consolidated Financial Statements.”
Accounts Receivable—Allowance for Doubtful Accounts
The allowance for doubtful accounts represents adjustments to customer trade accounts receivable for
amounts deemed partially or entirely uncollectible. Management believes the accounting estimate related to the
allowance for doubtful accounts is a “critical accounting estimate” because significant changes in the
assumptions used to develop the estimate could materially affect key financial measures, including other selling
and administrative expenses, net income and accounts receivable. In addition, the allowance requires a high
degree of judgment since it involves estimation of the impact of both current and future economic factors in
relation to its customers’ ability to pay amounts owed to Mattel.
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