Annual Report 1997 (1.5 MB PDF) - adidas Group

Property and equipment and depreciation:
Property and equipment are stated at cost. Depreciation is computed on a declining balance or
straight-line basis based on useful lives ranging from 2 to 50 years as follows:
Depreciation rates
Buildings 2% to 10%
Leasehold improvements 5% to 20%
Equipment, machinery and furniture and fittings 10% to 50%
The cost of maintenance and repairs is charged to expense as incurred. Significant renewals and
improvements are capitalized.
Recognition of revenues:
Revenues are recognized when title passes based on the terms of the sale. Sales are recorded
net of returns, discounts and allowances.
Advertising and promotional expenditures:
Production costs for media campaigns are shown under prepaid expenses until the advertising
takes place for the first time, after which they will be expensed in full. Other media campaign
costs are expensed over the original duration of the campaign on a straight-line basis.
Promotional expenses, including one-time upfront payments for promotional contracts, are
generally expensed pro rata over the whole term of the agreement.
Income taxes:
adidas-Salomon AG and Subsidiaries
Notes to Consolidated Financial Statements
Income taxes are computed in accordance with accounting principles generally accepted in the
countries in which the Company operates.
The Company recognized deferred tax liabilities for differences between the financial reporting and
tax basis of its assets and liabilities.
Deferred tax assets including assets relating to net operating loss carryforwards are recognized
only to the extent that there is a reasonable expectation of their realization in the period when
they arose.
The Company will adopt International Accounting Standard No. 12 (revised 1996) for the fiscal
year beginning January 1, 1998.
The application of the new standard will result in significantly higher deferred tax assets. This is
mainly due to the capitalization of deferred tax assets arising from tax loss carryforwards, which
will be re-assessed in any period subsequent to the loss. Deferred tax expense will increase
accordingly, mainly due to the utilization of tax loss carryforwards in Germany.
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