Nu Skin Enterprises, Inc. (the “Company”) is a leading, global direct selling company that develops and distributes pre- mium quality, innovative personal care products and nutritional supplements that are sold worldwide under the Nu Skin  and Pharmanex brands. The Company also markets technology-related products and services under the Big Planet brand.  The Company reports revenue from five geographic regions: North Asia, which consists of Japan and South Korea; Greater  China, which consists of China, Hong Kong and Taiwan; North America, which consists of the United States and Canada;  South Asia/Pacific, which consists of Australia, Brunei, Malaysia, New Zealand, the Philippines, Singapore and Thailand;  and Other Markets, which consists of Brazil, Europe, Guatemala, Israel, and Mexico (the Company’s subsidiaries operating  in these countries are collectively referred to as the “Subsidiaries”).  The consolidated financial statements include the accounts of the Company and the Subsidiaries. All significant intercom- pany accounts and transactions are eliminated in consolidation. The preparation of these financial statements in conformity with accounting principles generally accepted in the United  States required management to make estimates and assumptions that affect the reported amounts of assets and liabilities  and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of rev- enue and expenses during the reporting period. Significant estimates include reserves for product returns, obsolete inven- tory, and taxes. Actual results could differ from these estimates. Cash equivalents are short-term, highly liquid instruments with original maturities of  90  days or less. Current investments consist entirely of auction rate municipal bonds classified as available-for-sale securities. The Com- pany, through its dealers, purchases and sells these securities at par value, and records them at cost, which approximates  fair market value due to their variable interest rates, which typically reset every  7  to  35  days, and despite the long-term  nature of their stated contractual maturities, along with the Company’s investment policy and practice to only invest in  high investment grade securities, the Company has the ability to quickly liquidate these securities. As a result, the Com- pany has no cumulative gross unrealized holding gains (losses) or gross realized gains (losses) from its current investments.  Interest income generated from these current investments is recorded in other income.  Certain reclassifications have been made to prior-year balances in order to conform to the current year presentation. Prior to December  31 ,  2004 , such investments had been classified as cash and cash equivalents. As of December  31 ,  2004 , the Company has revised its classification to report these securities as current investments in a separate line item on  its consolidated balance sheet. The Company has also made corresponding adjustments to its consolidated statement of cash  flows for all periods presented, to reflect the gross purchases and sales of these securities as investing activities rather than  as a component of cash and cash equivalents. Inventories consist primarily of merchandise purchased for resale and are stated at the lower of cost or market, using  the first-in, first-out method. The Company had reserves for obsolete inventory totaling $ 5 . 7  million, $ 5 . 4  million and  $ 5 . 2  million as of December  31 ,  2002 ,  2003  and  2004 , respectively.  57 Inventories Current investments Reclassifications Cash and cash equivalents Use of estimates Consolidation 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1 . THE COMPANY Notes to Consolidated Financial Statements