Mattel 2005 Annual Report Download - page 72

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freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the
criterion of “so abnormal” as stated in ARB No. 43. Additionally, SFAS No. 151 requires that the allocation of
fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities.
SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. Mattel does not expect the adoption of
SFAS No. 151 to have a material impact on its results of operations and financial position.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement
of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim
Financial Statements. SFAS No. 154 applies to all voluntary changes in accounting principle, and changes the
requirements for accounting for and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary change in accounting principle
unless it is impracticable, whereas APB Opinion No. 20 previously required that most voluntary changes in
accounting principle be recognized by including in net income of the period of the change the cumulative effect
of changing to the new accounting principle. SFAS No. 154 is effective for fiscal years beginning after
December 15, 2005. Mattel does not expect the adoption of SFAS No. 154 to have a material impact on its results
of operations and financial position.
Note 2—Goodwill
The change in the carrying amount of goodwill by reporting unit for the years ended 2005 and 2004 is
shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the US reporting units selling
those brands, thereby causing foreign currency translation impact to the US reporting units.
Mattel
Girls Brands
US Division
Mattel
Boys Brands
US Division
Fisher-Price
Brands US
American Girl
Brands International Total
(In thousands)
Balance at December 31,
2003 .................... $ 35,141 $ 54,222 $ 216,678 $ 207,571 $208,637 $722,249
Impact of currency exchange
rate changes .............. 2,425 189 474 — 10,343 13,431
Balance at December 31,
2004 .................... 37,566 54,411 217,152 207,571 218,980 735,680
Impact of currency exchange
rate changes .............. (3,563) (277) (697) — (13,074) (17,611)
Balance at December 31,
2005 .................... $ 34,003 $ 54,134 $ 216,455 $ 207,571 $205,906 $718,069
In 2005, Mattel performed the annual impairment test required by SFAS No. 142 and determined that its
goodwill was not impaired.
Note 3—Income Taxes
Consolidated pre-tax income consists of the following (in thousands):
For the Year
2005 2004 2003
US operations ................................................... $ 27,990 $ 89,934 $166,884
Foreign operations ............................................... 624,059 606,320 573,970
$652,049 $696,254 $740,854
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