Best Buy 2007 Annual Report Download - page 65

50
New Accounting Standards
In July 2006, the FASB issued FIN No. 48, Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB
Statement No. 109. FIN No. 48 provides guidance regarding
the recognition, measurement, presentation and disclosure in
the financial statements of tax positions taken or expected to
be taken on a tax return, including the decision whether to
file or not to file in a particular jurisdiction. FIN No. 48 is
effective for fiscal years beginning after December 15, 2006.
We will adopt FIN No. 48 beginning in the first quarter of
fiscal 2008. The cumulative effect of applying the provisions
of FIN No. 48 upon initial adoption will be reported as an
adjustment to retained earnings as of the beginning of fiscal
2008. We are evaluating the impact, if any, the adoption of
FIN No. 48 will have on our operating income, net earnings
or retained earnings.
In May 2007, the FASB issued FSP FIN No. 48-1, Definition
of “Settlement” in FASB Interpretation No. 48.FSPFIN
No. 48-1 provides guidance on how a company should
determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax
benefits. FSP FIN No. 48-1 is effective upon initial adoption
of FIN No. 48, which we will adopt in the first quarter of
fiscal 2008, as indicated above.
In September 2006, the U.S. Securities and Exchange
Commission (“SEC”) issued Staff Accounting Bulletin
(“SAB”) No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current
Year Financial Statements, which provides interpretive
guidance on the consideration of the effects of prior-year
misstatements in quantifying current-year misstatements for
the purpose of a materiality assessment. SAB No. 108 is
effective for fiscal years ending after November 15, 2006.
We adopted SAB No. 108 in the fourth quarter of fiscal
2007. The cumulative effect of initially applying the
provisions of SAB No. 108 may be reported as a
cumulative adjustment to retained earnings at the beginning
of the year of adoption. The adoption of SAB No. 108 had
no impact on our net earnings or financial position.
In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures
about fair value measurements. SFAS No. 157 applies under
other accounting pronouncements that require or permit fair
value measurements, the FASB having previously concluded
in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, SFAS No. 157
does not require any new fair value measurements. SFAS
No. 157 is effective for fiscal years beginning after
December 15, 2007. We plan to adopt SFAS No. 157
beginning in the first quarter of fiscal 2009. We are
evaluating the impact, if any, the adoption of SFAS No. 157
will have on our operating income or net earnings.
In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits companies to choose to measure
many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by
providing companies with the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge
accounting provisions. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. Companies are
not allowed to adopt SFAS No. 159 on a retrospective basis
unless they choose early adoption. We plan to adopt SFAS
No. 159 at the beginning of fiscal 2009. We are evaluating
the impact, if any, the adoption of SFAS No. 159 will have
on our operating income or net earnings.
Outlook for Fiscal 2008
Our outlook for fiscal 2008 is based on information
presently available and contains certain assumptions
regarding future economic conditions. Differences in actual
economic conditions compared with our assumptions could
have a material impact on our fiscal 2008 results. Refer to
Item 1A, Risk Factors, of this Annual Report on Form 10-K
for additional important factors that could cause future
results to differ materially from those contemplated by the
following forward-looking statements.
Looking forward to fiscal 2008, we are projecting net
earnings in a range of $3.10 to $3.25 per diluted share,
an average increase of 14%. We expect the earnings
growth to be driven primarily by an increase in revenue of
approximately 9% and a reduction in our SG&A rate,
partially offset by a decrease in our gross profit rate. Our
effective income tax rate for fiscal 2008 is projected to be
approximately 36%.
Specifically, we are forecasting revenue of $39.0 billion in
fiscal 2008, compared with revenue of $35.9 billion in fiscal
2007. We expect the opening of approximately 130 new
stores will drive more than half of the revenue growth. For the
fiscal year, we are projecting an increase in comparable store
sales of 3% to 5%. Our fiscal 2008 reporting period will
include 52 weeks, whereas our fiscal 2007 reporting period
included 53 weeks.