AutoNation 2006 Annual Report Download - page 38

Table of Contents
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In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment,” a
revision of SFAS No. 123. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) regarding its interpretation of
SFAS No. 123R. The standard requires companies to expense the grant-date fair value of stock options and other equity-based
compensation issued to employees and is effective for annual periods beginning after December 15, 2006. As of January 1, 2006, we
adopted SFAS No. 123R and related interpretive guidance issued by the FASB and the SEC using the modified prospective transition
method. Accordingly, our Consolidated Financial Statements for prior periods have not been restated to reflect the adoption of
SFAS No. 123R.
In October 2005, the FASB issued FASB Staff Position (“FSP”) No. FAS 13-1, “Accounting for Rental Costs Incurred during a
Construction Period.” FSP No. FAS 13-1 requires rental costs associated with operating leases that are incurred during a construction
period to be recognized as rental expense. FSP No. FAS 13-1 is effective for reporting periods beginning after December 15, 2005 and did
not have a material impact on our Consolidated Financial Statements.
In March 2006, the EITF reached a consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (that is, Gross versus Net Presentation)” (EITF 06-3), which
allows companies to adopt a policy of presenting taxes in the income statement on either a gross or net basis. Taxes within the scope of this
EITF include taxes that are imposed on a revenue transaction between a seller and a customer, for example, sales taxes, use taxes, value-
added taxes, and some types of excise taxes. EITF 06-3 is effective for interim and annual reporting periods beginning after December 15,
2006. EITF 06-3 will not impact the method for recording and reporting these sales taxes in our Consolidated Financial Statements as our
policy is to exclude all such taxes from revenue.
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB
Statement No. 109, Accounting for Income Taxes” (FIN 48) to create a single model to address accounting for uncertainty in tax positions.
FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before
being recognized. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently
evaluating the impact of adopting FIN 48 and do not expect the adoption of FIN 48 will have a material impact on our Consolidated
Financial Statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value and applies to
other accounting pronouncements that require or permit fair value measurements and expands disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are
currently evaluating the impact of adopting SFAS No. 157 on our Consolidated Financial Statements.
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, to address diversity in practice in quantifying
financial statement misstatements and the potential for the build up of improper amounts on the balance sheet. SAB No. 108 identifies the
approach that registrants should take when evaluating the effects of unadjusted misstatements on each financial statement, the
circumstances under which corrections of misstatements should result in a revision to financial statements, and disclosures related to the
correction of misstatements. SAB No. 108 is effective for the fiscal year ending December 31, 2006. The adoption of SAB No. 108 did
not have a material impact on our Consolidated Financial Statements.
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Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and
performance of our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain
statements and information set forth in this Annual Report on Form 10-K, as well as other written or oral statements made from time to
time by us or by our authorized executive officers on our behalf, constitute “forward-looking statements” within the meaning of the
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