Advance Auto Parts 2006 Annual Report Download - page 78

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 30, 2006, December 31, 2005 and January 1, 2005
(in thousands, except per share data)
hedged debt. Therefore, the Company has recorded all adjustments to the fair value of the hedge instruments in
accumulated other comprehensive income through the maturity date of the applicable hedge arrangement. The fair
value at December 30, 2006 and December 31, 2005, respectively, was an unrecognized gain of $156 and $3,090 on
the swaps. Any amounts received or paid under these hedges will be recorded in the statement of operations as
earned or incurred.
Based on the estimated current and future fair values of the hedge arrangements at December 30, 2006, the
Company estimates amounts currently included in accumulated other comprehensive income that will be reclassified
to earnings in the next 12 months will consist of a net loss of $104 associated with the interest rate swaps.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income is reported in accordance with SFAS No. 130, “Reporting
Comprehensive Income.” Accumulated other comprehensive income consists of the following:
Unrealized gain
(loss) on hedge
arrangement
Adjustment to
adopt FASB
Statement No. 158
Accumulated
Other
Comprehensive
Income
Balance, January 3, 2004 (529)$ -$ (529)$
Fiscal 2004 activity 1,343 - 1,343
Balance, January 1, 2005 814$ -$ 814$
Fiscal 2005 activity 2,276 - 2,276
Balance, December 31, 2005 3,090$-$ 3,090$
Fiscal 2006 activity (2,934) 3,316 382
Balance, December 30, 2006 156$ 3,316$ 3,472$
Goodwill and Other Intangible Assets
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company tests goodwill and
other indefinite-lived intangibles for impairment at least on an annual basis. Testing for impairment is a two-step
process as prescribed in SFAS No. 142. The first step is a review for potential impairment, while the second step
measures the amount of impairment, if any. The Company has elected to complete its annual impairment test as of
the first day of its fourth quarter. An impairment loss would be recognized when the assets’ fair value is below their
carrying value. For fiscal 2006, our impairment analysis yielded no impairment.
Valuation of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets under the provisions of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires the review for
impairment of long-lived assets, whenever events or changes in circumstances indicate that the carrying amount of
an asset might not be recoverable and exceeds its fair value.
Significant factors, which would trigger an impairment review, include the following:
xSignificant negative industry trends;
xSignificant changes in technology;
xSignificant underutilization of assets; and
xSignificant changes in how assets are used or are planned to be used.
When such an event occurs, the Company estimates the future cash flows expected to result from the use of the
asset and its eventual disposition. These impairment evaluations involve estimates of asset useful lives and future
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