Nautilus 2003 Annual Report Download - page 52

Table of Contents
Foreign Currency Transactions – Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on
transactions denominated in currencies other than the functional currency, including U.S. dollars. Gains and losses on those foreign
currency transactions are included in determining net income or loss for the period in which exchange rates change. Foreign currency
transaction gains and (losses) were $(31), $210, and $(54) for the years ended December 31, 2003, 2002 and 2001, respectively.
Stock-Based Compensation – The Company continues to measure compensation expense for its stock-based employee compensation
plans using the method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees .
The Company provides pro forma disclosures of net income and earnings per share as if the method prescribed by SFAS No. 123,
Accounting for Stock-Based Compensation , had been applied in measuring compensation expense. Refer to Note 2 for further
information.
Comprehensive Income is defined as net income as adjusted for changes to equity resulting from events other than net income or
transactions related to an entity’
s capital structure. Comprehensive income for the years ended December 31, 2003, 2002 and 2001 equals
net income plus or minus the effect of foreign currency translation adjustments. The foreign currency translation adjustments are due to
the translation of the financial statements of our foreign subsidiaries. Accumulated other comprehensive income consists solely of
cumulative foreign currency translation adjustments as of December 31, 2003 and 2002.
Fair Value of Financial Instruments – The carrying amounts of the Company’s cash and cash equivalents, short-
term investments, trade
receivables, notes receivable, trade payables, royalty payable to stockholders, and accrued liabilities approximate their estimated fair
values due to the short-term maturities of those financial instruments.
Recent Accounting Pronouncements – In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities . The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred
rather than at the date of commitment to an exit or disposal plan. Costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal
activity. The Company adopted this statement as of January 1, 2003. The adoption of SFAS No. 146 has not had a material effect on the
Company’s financial position, results of operations, or cash flows.
In November 2002, the FASB issued FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others . FIN No. 45 is an interpretation of FASB Statements No. 5, 57 and 107 and rescinds FIN
No. 35. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. The disclosure requirements in FIN No. 45 were effective for the year ended
December 31, 2002. The adoption of the recognition requirement of FIN No. 45 has not had a material impact on the Company’s
financial position or results of operations.
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities (revised December 2003). FIN No. 46
addresses when a company should include in its financial statements the assets, liabilities and activities of a variable interest entity. FIN
No. 46 defines variable interest entities as those entities with a business purpose that either do not have any equity investors with voting
rights or have equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 also
requires disclosures about variable interest entities that a company is not
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