Big Lots 2008 Annual Report Download - page 105

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37
Lease Accounting
In order to recognize rent expense on our leases, we evaluate many factors to identify the lease term such as
the contractual term of the lease, our assumed possession date of the property, renewal option periods, and the
estimated value of leasehold improvement investments that we are required to make. Based on this evaluation,
our lease term is typically the minimum contractually obligated period over which we have control of the
property. This term is used because although many of our leases have renewal options, we typically do not incur
an economic or contractual penalty in the event of non-renewal. Therefore, we typically use the initial minimum
lease term for purposes of calculating straight-line rent, amortizing deferred rent, and recognizing depreciation
expense on our leasehold improvements.
Recently Adopted Accounting Pronouncements
Fair Value Measurements
Effective February 3, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), for
financial assets and liabilities on a prospective basis. The FASB deferred the effective date of SFAS No.
157 for one year for non-financial assets and liabilities that are recognized or disclosed at fair value in the
financial statements in a non-recurring basis, which we will adopt effective the beginning of 2009. SFAS
No. 157 addresses how companies should approach measuring fair value and expands disclosures about fair
value measurements under other accounting pronouncements that require or permit fair value measurements.
The standard provides a single definition of fair value that is to be applied consistently for most accounting
applications and also generally describes and prioritizes according to reliability the methods and inputs used
in valuations. SFAS No. 157 prescribes additional disclosures regarding the extent of fair value measurements
included in a company’s financial statements and the methods and inputs used to arrive at these values. The
adoption of this statement for financial assets and liabilities did not have any impact on our financial condition,
results of operations, or liquidity. The adoption of this statement for non-financial assets and liabilities in 2009
is not expected to have a material impact on our financial condition, results of operations, or liquidity.
Pension
Effective in 2008, SFAS No. 158 requires us to measure defined benefit plan assets and obligations as of the
date of our year-end consolidated balance sheet. Previously, our pension plans had a measurement date of
December 31. Switching to the new measurement date required one-time adjustments of $0.1 million to retained
earnings and less than $0.1 million to accumulated comprehensive income in 2008 per the transition guidance
in SFAS No. 158.
Fair Value Option
Effective February 3, 2008, we adopted SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities. SFAS No. 159 permits us to choose to measure certain financial instruments and other
items at fair value. We did not elect to measure any additional financial assets or liabilities at fair value.
Recent Accounting Pronouncements – Future Adoptions
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which changes the accounting
for business combinations and their effects on the financial statements. SFAS No. 141(R) will be effective at the
beginning of 2009. The adoption of this statement is not expected to have a material impact on our financial
condition, results of operations, or liquidity.
In December 2007, the FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 requires entities to report non-
controlling interests in subsidiaries as equity in their consolidated financial statements. SFAS No. 160 will be
effective at the beginning of 2009. The adoption of this statement is not expected to have a material impact on
our financial condition, results of operations, or liquidity.