Mattel 2012 Annual Report Download - page 53

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. These accounting
policies and estimates 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 (“US GAAP”). 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.
Mattel’s products are sold throughout the world. Products within the North America segment are sold
directly to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail
outlets and, to a limited extent, wholesalers, and directly to consumers. Products within the International segment
are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in
Australia and New Zealand, and through agents and distributors in those countries where Mattel has no direct
presence.
In recent years, the mass-market retail channel has experienced significant shifts in market share among
competitors, causing some large retailers to experience liquidity problems. Mattel’s sales to customers are
typically made on credit without collateral and are highly concentrated in the third and fourth quarters due to the
cyclical nature of toy sales, which results in a substantial portion of trade receivables being collected during the
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