Build-A-Bear Workshop 2014 Annual Report Download - page 52

(o) Selling, General, and Administrative Expenses
Selling, general, and administrative expenses include store payroll
and related benefits, advertising, credit card fees, store supplies
and store closing costs, as well as central oce management
payroll and related benefits, travel, information systems, accounting,
insurance, legal, and public relations. It also includes depreciation
and amortization of central oce leasehold improvements, furniture,
fixtures, and equipment, as well as amortization of trademarks and
intellectual property.
(p) Store Preopening Expenses
Store preopening expenses, including store set-up, certain labor
and hiring costs, and rental charges incurred prior to store openings
are expensed as incurred and are included in selling, general and
administrative expenses.
(q) Advertising
The costs of advertising and marketing programs are charged to
operations in the first period the program takes place. Advertising
expense was $25.8 million, $23.7 million and $23.0 million for fiscal
years 2014, 2013 and 2012, respectively.
(r) Income Taxes
Income taxes are accounted for using a balance sheet approach
known as the asset and liability method. The asset and liability
method accounts for deferred income taxes by applying the statutory
tax rates in eect at the date of the consolidated balance sheets
to dierences between the book basis and the tax basis of assets
and liabilities. Deferred taxes are reported on a jurisdictional basis.
Noncurrent deferred tax assets are included in other assets, net and
noncurrent deferred tax liabilities are included in other liabilities.
Tax positions are reviewed at least quarterly and adjusted as new
information becomes available. The recoverability of deferred tax
assets is evaluated by assessing the adequacy of future expected
taxable income from all sources, including reversal of taxable
temporary dierences, forecasted operating earnings and available
tax planning strategies. These estimates of future taxable income
inherently require significant judgment. To the extent it is considered
more likely than not that a deferred tax asset will be not recovered, a
valuation allowance is established.
The Company accounts for its total liability for uncertain tax positions
according to the provisions of ASC section 740-10-25. The Company
recognizes estimated interest and penalties related to uncertain tax
positions in income tax expense. See Note 8—Income Taxes for further
discussion.
(s) Income (Loss) Per Share
Under the two-class method, basic income (loss) per share is
determined by dividing net income or loss allocated to common
stockholders by the weighted average number of common shares
outstanding during the period. In periods of net loss, no eect is given
to the Company’s participating securities as they do not contractually
participate in the losses of the Company. Diluted earnings or loss
per share reflects the potential dilution that could occur if options to
issue common stock were exercised. In periods in which the inclusion
of such instruments is anti-dilutive, the eect of such securities is not
given consideration.
(t) Stock-Based Compensation
The Company has share-based compensation plans covering the
majority of its management groups and its Board of Directors. The
Company accounts for share-based payments utilizing the fair value
recognition provisions of ASC section 718. The Company recognizes
compensation cost for equity awards over the requisite service period
for the entire award. See Note 12 – Stock Incentive Plans. For fiscal
2014, 2013 and 2012, selling, general and administrative expense
includes $2.1 million, $2.8 million and $3.6 million, respectively, of
stock-based compensation expense.
(u) Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income (loss) and
foreign currency translation adjustments.
(v) Deferred Compensation Plan
The Company maintains a Deferred Compensation Plan for the
benefit of certain management employees. The investment funds
oered to the participant generally correspond to the funds oered
in the Company’s 401(k) plan, and the account balance fluctuates
with the investment returns on those funds. The fair value of the
assets, classified as trading securities, and corresponding liabilities
are based on unadjusted quoted market prices for the funds in active
markets with sucient volume and frequency (Level 1). The current
portions of the assets of the Deferred Compensation Plan and the
related liabilities of $0.3 million as of January 3, 2015 are presented
in prepaid expenses and other current assets and accrued expenses
in the accompanying consolidated balance sheets. The non-current
portions of the assets and the related liabilities of $0.5 million as of
January 3, 2015 are presented in other assets, net and other liabilities
in the accompanying consolidated balance sheets.
(w) Fair Value of Financial Instruments
For purposes of financial reporting, management has determined
that the fair value of financial instruments, including cash and cash
equivalents, receivables, short term investments, accounts payable
and accrued expenses, approximates book value at January 3, 2015
and December 28, 2013.
(x) Use of Estimates
The preparation of the consolidated financial statements requires
management of the Company to make a number of estimates and
assumptions relating to the reported amount of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. The assumptions
used by management in future estimates could change significantly
due to changes in circumstances, including, but not limited to,
challenging economic conditions. Accordingly, future estimates may
change significantly. Significant items subject to such estimates and
Notes to Consolidated Financial Statements (continued)
40 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT