Mattel 2006 Annual Report Download - page 62

and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair
value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data, for example, the reporting entity’s own data. Fair value measurements would be separately
disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Mattel does not
expect the adoption of SFAS No. 157 to have a material impact on its results of operations and financial position.
SFAS No. 159
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments
and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also
establishes presentation and disclosure requirements designed to facilitate comparisons between companies that
choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for
Mattel as of January 1, 2008. Mattel has not completed its evaluation of SFAS No. 159 but does not expect the
adoption of SFAS No. 159 to have a material effect on its operating results or financial position.
Non-GAAP Financial Measure
In this Annual Report on Form 10-K, Mattel includes a non-GAAP financial measure, gross sales, which it
uses to analyze its operations and to monitor, assess and identify meaningful trends in its operating and financial
performance. Net sales, as reported in the consolidated statements of operations, include the impact of sales
adjustments, such as trade discounts and other allowances. Gross sales represent sales to customers, excluding
the impact of sales adjustments. Consistent with its segment reporting, Mattel presents changes in gross sales as a
metric for comparing its aggregate, business unit, brand and geographic results to highlight significant trends in
Mattel’s business. Changes in gross sales are discussed because, while Mattel records the detail of such sales
adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally not
associated with individual products.
A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as
follows (in thousands):
For the Year
2006 2005 2004
Revenues
Domestic:
Mattel Girls & Boys Brands US .......................... $1,507,493 $1,364,922 $1,511,550
Fisher-Price Brands US ................................. 1,471,604 1,358,562 1,319,200
American Girl Brands .................................. 439,970 436,085 379,112
Total Domestic ............................................ 3,419,067 3,159,569 3,209,862
International .............................................. 2,738,967 2,463,984 2,336,236
Gross sales ............................................... 6,158,034 5,623,553 5,546,098
Sales adjustments .......................................... (507,878) (444,537) (443,312)
Net sales ................................................. $5,650,156 $5,179,016 $5,102,786
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Exchange Rate Risk
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory
purchase transactions denominated in the Euro, British pound sterling, Canadian dollar, Mexican peso, Hong
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