World Fuel Services 2002 Annual Report Download - page 51

The following table sets forth activities in our allowance for bad debts (in thousands):
For the Nine Months
Ended December 31, For the Year Ended March 31,
2002 2001 2002 2001 2000
(unaudited)
Balance at beginning of period 11,012$ 11,167$ 11,167$ 15,202$ 6,709$
Charges to provision for bad debts 2,182 3,244 3,928 7,909 19,250
Write-off of uncollectible accounts receivable (2,473) (3,608) (4,288) (12,145) (11,243)
Recoveries of bad debts 391 198 205 201 486
Balance at end of period 11,112$ 11,001$ 11,012$ 11,167$ 15,202$
For additional information on accounts receivable and allowance for bad debts in our marine and aviation segments, see
“Business Segments” in Note 8.
Inventories
Inventories are stated at the lower of cost (principally, first-in, first-out) or market. Components of inventory cost
include fuel purchase costs, and the related transportation costs and storage fees. Also included in inventories are costs not
yet billed, consistent with our policy on revenue recognition.
Derivatives
We use commodity swap contracts to hedge fixed fuel prices on future sales to our customers with, or without, physical
delivery of product. We also may hedge the physical delivery of future purchases through a commodity based derivative
instrument.
Effective April 2001, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, "Accounting for
Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and 138 and various interpretations of the
Derivatives Implementation Task Force (collectively, SFAS No. 133). SFAS No. 133 established accounting and reporting
standards requiring that all derivative instruments (including certain derivative instruments embedded in other contracts) be
recorded on the balance sheet as either an asset or a liability, and measured at fair value.
Our swap contracts are cash flow hedges of the related sales commitments. Changes in the fair value of our swap
contracts are recognized as a component of other comprehensive income (“OCI”) until the underlying hedged sale
commitments are recognized in earnings. The ineffective portion of a hedge’s change in fair value is immediately
recognized in earnings as part of cost of sales. We formally document all relationships between hedging instruments and
hedged items, as well as our risk management objectives and strategies for undertaking our hedge transactions.
As of December 31, 2002, we have recorded our swap contracts at their fair value of $9.5 million. In the accompanying
Consolidated Balance Sheets, such amount was included as Prepaid expenses and other current assets with an offsetting
amount in Accrued expenses since our OCI amounts for swap contracts fully offset at December 31, 2002. During the nine
months ended December 31, 2002, all net changes in the fair value of our cash flow hedges were immaterial, as were any
ineffective portions of these hedges. No cash flow hedges were derecognized or discontinued during the nine months ended
December 31, 2002, and the amount of estimated unrealized net gains or losses which are expected to be reclassified to
earnings in the next twelve months is not material.
Prior to April 2001, the fair values of our swap contracts were not recorded in our financial statements. Any differences
paid or received on swap contracts were recognized as adjustments to earnings over the life of the contracts. Any gains or
losses on sale commitments were recognized as adjustments to earnings as part of cost of sales upon the delivery of fuel or
maturity of the commitment.
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