Build-A-Bear Workshop 2014 Annual Report Download - page 41

Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued ASU
2014-09, Revenue from Contracts with Customers, which will replace
most existing revenue recognition guidance in U.S. GAAP. The core
principle of the ASU is that an entity should recognize revenue
for the transfer of goods or services equal to the amount that it
expects to be entitled to receive for those goods or services. The
ASU requires additional disclosure about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments.
The ASU will be eective for us beginning January 1, 2017, and
allows for both retrospective and modified retrospective methods
of adoption. We are in the process of determining the method of
adoption and assessing the impact of this ASU on our consolidated
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Our market risks relate primarily to changes in interest rates, and
we bear this risk in two specific ways. First, our revolving credit
facility carries a variable interest rate that is tied to market indices
and, therefore, our results of operations and our cash flows can
be impacted by changes in interest rates. Outstanding balances
under our credit facility bear interest at LIBOR plus 1.8%. We had no
borrowings during fiscal 2014. Accordingly, a 100 basis point change
in interest rates would result in no material change to our annual
interest expense. The second component of interest rate risk involves
the short term investment of excess cash in short term, investment
grade interest-bearing securities. If there are changes in interest
rates, those changes would aect the investment income we earn on
these investments and, therefore, impact our cash flows and results
of operations.
We conduct operations in various countries, which expose us to
changes in foreign exchange rates. The financial results of our
foreign subsidiaries and franchisees may be materially impacted by
exposure to fluctuating exchange rates. Reported sales, costs and
expenses at our foreign subsidiaries, when translated into U.S. dollars
for financial reporting purposes, can fluctuate due to exchange rate
movement. While exchange rate fluctuations can have a material
impact on reported revenues, costs and expenses, and earnings, this
impact is principally the result of the translation eect and does not
materially impact our short-term cash flows.
Although we enter into a significant amount of purchase obligations
outside of the U.S., these obligations are settled primarily in U.S.
dollars and, therefore, we believe we have only minimal exposure
at present to foreign currency exchange risks for our purchase
obligations. Historically, we have not hedged our currency risk and do
not currently anticipate doing so in the future.
We do not engage in financial transactions for trading or speculative
purposes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The financial statements and schedules are listed under Item 15(a)
and filed as part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive
Ocer and Chief President Bear and Chief Financial Ocer, has
evaluated the eectiveness of our disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)),
as of the end of the period covered by this report. Our disclosure
controls and procedures are designed to ensure that information
required to be disclosed by us in the reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and
is accumulated and communicated to management, including
our certifying ocers, as appropriate to allow timely decisions
regarding required disclosure. Based on the foregoing evaluation,
our management, including the Chief Executive Ocer and Chief
President Bear and Chief Financial Ocer, concluded that our
disclosure controls and procedures were eective as of January 3,
2015, the end of the period covered by this Quarterly Report.
It should be noted that our management, including the Chief
Executive Ocer and Chief President Bear and the Chief Financial
Ocer, does not expect that our disclosure controls and procedures
or internal controls will prevent all error and all fraud. A control
system, no matter how well conceived or operated, can provide
only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion
BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT 29