AutoNation (AN)

      As of January 1, 2003, the Company adopted Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” EITF 02-16, as it applies to the Company, addresses the recognition of certain manufacturer allowances and requires that manufacturer allowances be treated as a reduction of inventory cost unless specifically identified as reimbursement for services or costs incurred. The adoption of EITF 02-16 resulted in a cumulative effect of accounting change, net of $9.1 million of income tax, totaling $14.6 million to reflect the deferral of certain allowances, primarily floorplan assistance, into inventory cost in 2003. The impact of this accounting change for the year ended December 31, 2003 was an increase of $3.3 million in Cost of Sales. On a comparable basis, the impact of this accounting change for the year ended December 31, 2002 would have been an increase of $4.7 million in Cost of Sales. Additionally, the adoption of EITF 02-16 impacted the accounting for certain manufacturers’ advertising allowances resulting in a reclassification that increased Selling, General and Administrative Expenses and, correspondingly, reduced Cost of Sales by $18.6 million for the year ended December 31, 2003 to reflect these allowances as a reduction of Cost of Sales. On a comparable basis, the reclassification to increase Selling, General and Administrative Expenses and to reduce Cost of Sales for the year ended December 31, 2002 would have been $19.5 million.