Under Armour 2010 Annual Report Download - page 59

Upon retirement or disposition of property and equipment, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in selling, general and administrative
expenses for that period. Major additions and betterments are capitalized to the asset accounts while maintenance
and repairs, which do not improve or extend the lives of assets, are expensed as incurred.
Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not
be recoverable. These factors may include a significant deterioration of operating results, changes in business
plans, or changes in anticipated cash flows. When factors indicate that an asset should be evaluated for possible
impairment, the Company reviews long-lived assets to assess recoverability from future operations using
undiscounted cash flows. If future undiscounted cash flows are less than the carrying value, an impairment is
recognized in earnings to the extent that the carrying value exceeds fair value. No material impairments were
recorded in the years ended December 31, 2010, 2009 and 2008.
Accrued Expenses
At December 31, 2010, accrued expenses primarily included $31.0 million and $7.8 million of accrued
compensation and benefits and marketing expenses, respectively. At December 31, 2009, accrued expenses
primarily included $14.5 million, $6.9 million and $5.2 million of accrued compensation and benefits, certain
customer markdowns and discounts and marketing expenses, respectively.
Foreign Currency Translation and Transactions
The functional currency for each of the Company’s wholly owned foreign subsidiaries is generally the
applicable local currency. The translation of foreign currencies into U.S. dollars is performed for assets and
liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenue and
expense accounts using average foreign currency exchange rates during the period. Capital accounts are
translated at historical foreign currency exchange rates. Translation gains and losses are included in stockholders’
equity as a component of accumulated other comprehensive income. Adjustments that arise from foreign
currency exchange rate changes on transactions, primarily driven by intercompany transactions, denominated in a
currency other than the local currency are included in other expense, net on the consolidated statements of
income.
Derivatives
The Company uses derivative financial instruments in the form of foreign currency forward contracts to
minimize the risk associated with foreign currency exchange rate fluctuations. The Company accounts for
derivative financial instruments pursuant to applicable accounting guidance. This guidance establishes
accounting and reporting standards for derivative financial instruments and requires all derivatives to be
recognized as either assets or liabilities on the balance sheet and to be measured at fair value. Unrealized
derivative gain positions are recorded as other current assets or other non-current assets, and unrealized
derivative loss positions are recorded as accrued expenses or other long term liabilities, depending on the
derivative financial instrument’s maturity date.
Currently, the Company’s foreign currency forward contracts are not designated as cash flow hedges, and
accordingly, changes in their fair value are recorded to other expense, net on the consolidated statements of
income. The Company does not enter into derivative financial instruments for speculative or trading purposes.
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