American Eagle Outfitters 2009 Annual Report Download - page 44

In September 2009, the FASB approved the consensus on Emerging Issues Task Force (“EITF”) 08-1, Revenue
Arrangements with Multiple Deliverables, primarily codified under ASC 605, Revenue Recognition, as Accounting
Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrange-
ments (“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated
selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the
residual method of revenue allocation and require revenue to be allocated among the various deliverables in a multi-
element transaction using the relative selling price method. This guidance is effective for revenue arrangements
entered into or materially modified in fiscal years beginning after June 15, 2010. The Company is currently
evaluating the impact that the adoption of ASU 2009-13 will have on its Consolidated Financial Statements.
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures Topic 820:
Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 requires new disclosures
regarding transfers in and out of the Level 1 and 2 and activity within Level 3 fair value measurements and clarifies
existing disclosures of inputs and valuation techniques for Level 2 and 3 fair value measurements. The new
disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements,
which is effective for fiscal years beginning after December 15, 2010, and for interim reporting periods within those
years. The Company is currently evaluating the impact that the adoption of ASU 2010-06 will have on its
Consolidated Financial Statements and disclosures.
Foreign Currency Translation
The Canadian dollar is the functional currency for the Canadian business. In accordance with ASC 830,
Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into U.S. dollars
(the reporting currency) at the exchange rate prevailing at the balance sheet date. Revenues and expenses
denominated in foreign currencies were translated into U.S. dollars at the monthly average exchange rate for
the period. Gains or losses resulting from foreign currency transactions are included in the results of operations,
whereas, related translation adjustments are reported as an element of other comprehensive income in accordance
with ASC 220, Comprehensive Income (refer to Note 10 to the Consolidated Financial Statements).
Cash and Cash Equivalents, Short-term Investments and Long-term Investments
Cash includes cash equivalents. The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
As of January 30, 2010, short-term investments included auction rate securities (“ARS”) classified as available
for sale that the Company expects to be redeemed at par within 12 months, based on notice from the issuer.
As of January 30, 2010, long-term investments included investments with remaining maturities of greater than
12 months and consisted of ARS classified as available-for-sale that have experienced failed auctions or have long-
term auction resets. The remaining contractual maturities of our long-term investments are approximately
17 months to 38 years. The weighted average contractual maturity for our long-term investments is approximately
25 years.
Unrealized gains and losses on the Company’s available-for-sale securities are excluded from earnings and are
reported as a separate component of stockholders’ equity, within accumulated other comprehensive income, until
realized. The components of other-than-temporary impairment (“OTTI”) losses related to credit losses, as defined
by ASC 320 Investments — Debt and Equity Securities (“ASC 320”), are considered by the Company to be realized
losses. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to
determine any realized gain or loss.
Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents,
short-term investments and long-term investments.
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)