Advance Auto Parts 2004 Annual Report Download - page 39

Advance฀Auto฀Parts,฀Inc.฀and฀Subsidiaries
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Business,฀ and฀ Extraordinary,฀ Unusual฀ and฀ Infrequently฀
Occurring฀ Events฀ and฀ Transactions.”฀ This฀ statement฀ also฀
amends฀FASB฀Statement฀No.฀13,฀“Accounting฀for฀Leases,”฀
to฀ eliminate฀ an฀ inconsistency฀ between฀ the฀ required฀
accounting฀for฀sale-leaseback฀transactions฀and฀the฀required฀
accounting฀ for฀ certain฀ lease฀ modifications฀ that฀ have฀ eco-
nomic฀ effects฀ that฀ are฀ similar฀ to฀ sale-leaseback฀ transac-
tions.฀ Additional฀ amendments฀ include฀ changes฀ to฀ other฀
existing฀ authoritative฀ pronouncements฀ to฀ make฀ various฀
technical฀ corrections,฀ clarify฀ meanings฀ or฀ describe฀ their฀
applicability฀ under฀ changed฀ conditions.฀ The฀ Company฀
adopted฀ SFAS฀ No.฀ 145฀ during฀ the฀ first฀ quarter฀ of฀ fiscal฀
2003.฀For฀the฀fiscal฀years฀ended฀2004,฀2003฀and฀2002,฀the฀
Company฀recorded฀losses฀on฀the฀extinguishment฀of฀debt฀of฀
$3,230,฀$47,288฀and฀$16,822,฀respectively.
฀ In฀ July฀ 2003฀ (as฀ subsequently฀ updated฀ in฀ November฀
2003),฀the฀FASB฀released฀Emerging฀Issues฀Task฀Force,฀or฀
EITF,฀ Issue฀ No.฀ 03-10,฀ “Application฀ of฀ Issue฀ No.฀ 02-16฀฀
by฀Resellers฀to฀ Sales฀ Incentives฀ Offered฀ to฀ Customers฀by฀
Manufacturers.”฀ This฀ EITF฀ addresses฀ whether฀ a฀ reseller฀
should฀ account฀ for฀ consideration฀ received฀ from฀ a฀ vendor฀
that฀ is฀ a฀ reimbursement฀ by฀ the฀ vendor฀ for฀ honoring฀ the฀
vendor’s฀ sales฀incentives฀offered฀directly฀to฀consumers฀ in฀
accordance฀ with฀ the฀ guidance฀ in฀ EITF฀ Issue฀ No.฀ 02-16.฀฀
For฀ purposes฀ of฀ this฀ Issue,฀ the฀ “vendor’s฀ sales฀ incentive฀
offered฀ directly฀ to฀ consumers”฀ is฀ limited฀ to฀ a฀ vendor’s฀
incentive฀(i)฀that฀can฀be฀tendered฀by฀a฀consumer฀at฀resellers฀
that฀accept฀manufacturer’s฀incentives฀in฀partial฀(or฀full)฀of฀
the฀price฀charged฀by฀the฀reseller฀for฀the฀vendor’s฀product,฀
(ii)฀for฀which฀the฀reseller฀receives฀a฀direct฀reimbursement฀
from฀the฀vendor฀(or฀a฀clearinghouse฀authorized฀by฀the฀ven-
dor)฀ based฀ on฀ the฀ face฀ amount฀ of฀ the฀ incentive,฀ (iii)฀ for฀
which฀ the฀ terms฀ of฀ reimbursement฀ to฀ the฀ reseller฀ for฀ the฀
vendor’s฀sales฀incentive฀offered฀to฀the฀consumer฀must฀not฀
be฀ influenced฀ by฀ or฀ negotiated฀ in฀ conjunction฀ with฀ any฀
other฀ incentive฀arrangements฀between฀the฀vendor฀and฀the฀
reseller฀but,฀rather฀may฀only฀be฀determined฀by฀the฀terms฀of฀
the฀ incentive฀ offered฀ to฀ consumers฀ and฀ (iv)฀ whereby฀ the฀
reseller฀is฀subject฀to฀an฀agency฀relationship฀with฀ the฀ven-
dor,฀ whether฀ expressed฀ or฀ implied,฀ in฀ the฀ sales฀ incentive฀
transaction฀ between฀ the฀ vendor฀ and฀ the฀ consumer.฀ The฀
consensus฀ is฀ that฀ sales฀ incentives฀ that฀ meet฀ all฀ of฀ such฀฀
criteria฀ are฀ not฀ subject฀ to฀ the฀ guidance฀ in฀ EITF฀ Issue฀฀
No.฀02-16.฀The฀release฀is฀effective฀for฀fiscal฀periods฀begin-
ning฀ after฀ November฀ 25,฀ 2003.฀ The฀ Company฀ adopted฀฀
this฀release฀during฀the฀first฀quarter฀of฀fiscal฀2004฀with฀no฀
impact฀on฀its฀financial฀position฀or฀results฀of฀operations.
฀ In฀May฀2004,฀the฀FASB฀issued฀FASB฀Staff฀Position,฀or฀
FSP,฀ 106-2,฀ “Accounting฀ and฀ Disclosure฀ Requirements฀
Related฀ to฀ the฀ Medicare฀ Prescription฀ Drug,฀ Improvement฀
and฀Modernization฀Act฀of฀2003.”฀FSP฀106-2฀addresses฀the฀
appropriate฀ accounting฀ and฀ disclosure฀ requirements฀ for฀
companies฀ that฀ sponsor฀ a฀ postretirement฀ health฀ care฀ plan฀
that฀provides฀prescription฀drug฀benefits.฀The฀new฀guidance฀
was฀ deemed฀ necessary฀ as฀ a฀ result฀ of฀ the฀ 2003฀ Medicare฀
prescription฀law฀which฀includes฀a฀federal฀subsidy฀for฀quali-
fying฀ companies.฀ The฀ effective฀ date฀ of฀ FSP฀ 106-2฀ is฀ the฀
first฀ interim฀ or฀ annual฀ period฀ beginning฀ after฀ June฀ 15,฀
2004.฀ The฀ Company฀ completed฀ a฀ negative฀ plan฀ amend-
ment฀ to฀ eliminate฀ outpatient฀ prescription฀ drug฀ benefits฀
from฀its฀postretirement฀plan฀effective฀in฀the฀second฀quarter฀
of฀fiscal฀2004;฀therefore,฀the฀adoption฀of฀FSP฀106-2฀had฀no฀
impact฀ on฀ its฀ financial฀ position,฀ results฀ of฀ operations฀ or฀
related฀footnote฀disclosure.
฀ In฀ November฀ 2004,฀ the฀ FASB฀ issued฀ SFAS฀ No.฀ 151,฀
“Inventory฀Costs.”฀The฀new฀statement฀amends฀Accounting฀
Research฀Bulletin฀No.฀43,฀Chapter฀4,฀“Inventory฀Pricing,”฀
to฀ clarify฀ the฀ accounting฀ for฀ abnormal฀ amounts฀ of฀ idle฀
facility฀expense,฀freight,฀handling฀costs฀and฀wasted฀mate-
rial.฀This฀statement฀requires฀that฀those฀items฀be฀recognized฀
as฀ current-period฀ charges฀ and฀ requires฀ that฀ allocation฀ of฀
fixed฀ production฀ overheads฀ to฀ the฀ cost฀ of฀ conversion฀ be฀
based฀ on฀the฀ normal฀capacity฀ of฀the฀production฀facilities.฀
This฀statement฀is฀effective฀for฀fiscal฀years฀beginning฀after฀
June฀15,฀2005.฀The฀Company฀does฀not฀expect฀the฀adoption฀
of฀this฀statement฀to฀have฀a฀material฀impact฀on฀its฀financial฀
condition฀or฀results฀of฀operations.
฀ In฀ December฀ 2004,฀ the฀ FASB฀ issued฀ SFAS฀ No.฀ 123฀
(revised฀2004),฀“Share-Based฀Payment,”฀or฀SFAS฀No.฀123R.฀
SFAS฀ No.฀ 123R฀ replaces฀ SFAS฀No.฀123,฀ “Accounting฀for฀฀
Stock-Based฀Compensation”฀and฀supersedes฀APB฀Opinion฀
No.฀25,฀“Accounting฀for฀Stock฀Issued฀to฀Employees,”฀and฀
subsequently฀ issued฀ stock฀ option-related฀ guidance.฀ This฀
statement฀ establishes฀ standards฀ for฀ the฀ accounting฀ for฀
transactions฀in฀which฀an฀entity฀exchanges฀its฀equity฀instru-
ments฀ for฀ goods฀ or฀ services,฀ primarily฀ on฀ accounting฀ for฀
transactions฀in฀which฀an฀entity฀obtains฀employee฀services฀
in฀ share-based฀ payment฀ transactions.฀ It฀ also฀ addresses฀
transactions฀in฀which฀an฀entity฀incurs฀liabilities฀in฀exchange฀
for฀goods฀or฀services฀that฀are฀based฀on฀the฀fair฀value฀of฀the฀
entity’s฀ equity฀ instruments฀ or฀ that฀ may฀ be฀ settled฀ by฀ the฀
issuance฀ of฀ those฀ equity฀ instruments.฀ Entities฀ will฀ be฀
required฀to฀measure฀the฀cost฀of฀employee฀services฀received฀
in฀ exchange฀for฀an฀award฀of฀equity฀ instruments฀ based฀on฀฀