Mattel 2009 Annual Report Download - page 50

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demurrer. The Court sustained the demurrer without leave to amend, and entered an order of dismissal of the
action with prejudice on July 7, 2009. Plaintiffs filed a notice of appeal on September 1, 2009. Pursuant to an
agreement resolving the appeal, the appeal was dismissed on December 29, 2009. All stockholder derivative suits
stemming from the 2007 product recalls are now resolved.
Effects of Inflation
Inflation rates in the US and in major foreign countries where Mattel does business have not had a
significant impact on its results of operations or financial position during 2009, 2008, or 2007. Mattel receives
some protection from the impact of inflation from high turnover of inventories and its ability, under certain
circumstances and at certain times, to pass on higher prices to its customers.
Employee Savings Plan
Mattel sponsors a 401(k) savings plan, the Mattel, Inc. Personal Investment Plan (the “Plan”), for its
domestic employees. Contributions to the Plan include voluntary contributions by eligible employees and
employer automatic and matching contributions by Mattel. The Plan allows employees to allocate both their
voluntary contributions and their employer automatic and matching 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 of their Plan account balance to the Mattel Stock Fund, which allows employees to
limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan limits the
percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to 25%.
Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s
insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading
policy are limited to certain periods in which they may make allocations into or out of the Mattel Stock Fund.
Application of Critical Accounting Policies and Estimates
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 and estimates 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 and estimates 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 and estimates 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 Mattel’s significant accounting
policies, estimates, 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—Summary of Significant
Accounting Policies.”
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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