World Fuel Services 2002 Annual Report Download - page 55

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Such estimates primarily relate to the realizability of accounts and notes receivable,
and unsettled transactions and events as of the date of the financial statements. Accordingly, actual results could differ from
estimated amounts.
Fair Value of Financial Instruments
The estimated fair values of financial instruments, which are presented herein, have been determined by our
management using available market information and appropriate valuation methodologies. However, considerable judgment
was required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are
not necessarily indicative of amounts we could realize in a current market exchange.
Accounts and notes receivable, net, and accounts payable are reflected in the accompanying Consolidated Balance
Sheets at amounts considered by management to reasonably approximate fair value due to their short-term nature.
We estimate the fair value of our long-term debt generally using discounted cash flow analysis based on our current
borrowing rates for similar types of debt. As of December 31, 2002, the carrying value of the long-term debt approximated
the fair value of such instruments.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the presentation for the nine months ended
December 31, 2002.
Recent Accounting Pronouncements
In April 2002, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS
No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets, excluding goodwill.
The adoption of SFAS No. 144 did not have a material effect on our consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45 ("FIN No. 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies and expands
on the existing disclosure requirements for guarantees. FIN No. 45 also requires recognition of a liability at fair value of a
company’s obligations under certain guarantee contracts. The disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15, 2002. We believe that our consolidated financial statements as of
and for the nine months ended December 31, 2002 are in compliance with the disclosure requirements of FIN No. 45. The
initial recognition and measurement provisions of FIN No. 45 are applied only on a prospective basis to guarantees issued
after December 31, 2002, irrespective of the guarantor’s fiscal year-end. We are currently evaluating the impact of FIN No.
45, if any, on our financial position and results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN No. 46"), "Consolidation of Variable Interest Entities."
FIN No. 46 expands upon and strengthens existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity. A variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with
voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its
activities. FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's
residual returns or both. The consolidation requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Disclosure requirements apply to any financial statements issued after January 31, 2003.
Since currently we do not have variable interest entities, we do not believe that the implementation of FIN No. 46 will have a
material effect on our consolidated financial statements and related disclosures.
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