Build-A-Bear Workshop 2014 Annual Report Download - page 53

assumptions include the valuation of long-lived assets, including
trade credits and deferred income tax assets and the determination
of deferred revenue under the Company’s customer loyalty program.
(y) Sales Tax Policy
The Company’s revenues in the consolidated statement of operations
are net of sales taxes.
(z) Foreign Currency Translation
Assets and liabilities of the Company’s foreign operations with
functional currencies other than the U.S. dollar are translated at the
exchange rate in eect at the balance sheet date, while revenues
and expenses are translated at average rates prevailing during the
years. Translation adjustments are reported in accumulated other
comprehensive income, a separate component of stockholders’
equity. Gains and losses resulting from foreign exchange transactions
are recorded as a component of selling, general and administrative
expenses. Losses in fiscal 2014 were $1.6 million. Foreign exchange
transactional gains and losses were immaterial in 2013 and 2012.
(aa) Investment in Aliate
The Company holds a minority interest in Ridemakerz, LLC of
approximately 21%, which is accounted for under the equity method.
In 2009, the carrying value of this investment was reduced to $-0-.
No income or loss allocations, impairments or other charges related
to Ridemakerz were recorded in fiscal 2014 or 2013. In 2012, certain
investors exercised a put option on 1.25 million shares, requiring
an additional investment of $0.5 million, which was immediately
impaired and included in selling, general and administrative
expenses as a component of net loss before income taxes in the Retail
segment. Under the current agreements, the Company could, at its
discretion, own up to approximately 28% of fully diluted equity in
Ridemakerz. The Company has no further obligations relating to its
investment in Ridemakerz.
(bb) 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 the Company beginning January 1,
2017, and allows for both retrospective and modified retrospective
methods of adoption. The Company is in the process of determining
the method of adoption and assessing the impact of this ASU on its
consolidated financial statements.
(3) Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following
(in thousands):
(4) Property and Equipment
Property and equipment consist of the following (in thousands):
For 2014, 2013 and 2012, depreciation expense was $17.6 million, $18.6
million and $20.4 million, respectively.
In 2012, the Company made the decision to close a number of stores.
The Company considers a more likely than not assessment that
an individual location will close as a triggering event to review the
store asset group for recoverability. As a result of these reviews, it
was determined that certain stores would not be able to recover the
carrying value of store leasehold improvements through expected
undiscounted cash flows over the shortened remaining life of the
related assets. Accordingly, the carrying value of the assets was
reduced to fair value, calculated as the net present value of estimated
future cash flows for each asset group, and asset impairment
charges of $0.4 million, $1.0 million and $0.9 million were recorded
in 2014, 2013 and 2012, respectively, which are included in selling,
general and administrative expenses as a component of income (loss)
before income taxes in the Retail segment. Any remaining net book
value is depreciated over the shortened expected life. The inputs
used to determine the fair value of the assets are Level 3 fair value
inputs as defined by ASC section 820-10.
The Company reviews the operating performance and forecasts of
future performance for the stores in its Retail segment. If as a result
of that review, it is determined that any stores would not be able to
recover the carrying value of certain store leasehold improvements
through expected undiscounted cash flows over the remaining life
of the related assets, the carrying value of the assets is reduced to
fair value, calculated as the net present value of estimated future
cash flows for each asset group, and asset impairment charges are
Notes to Consolidated Financial Statements (continued)
2014 2013
Prepaid rent $7,848 $4,608
Short-term investments 1,121 -
Other 6,642 6,939
$15,611 $11,547
2014 2013
Land $2,261 $2,261
Furniture and fixtures 39,391 39,723
Computer hardware 22,720 21,722
Building 14,970 14,970
Leasehold improvements 119,894 124,068
Computer software 43,540 42,276
Construction in progress 5,034 2,655
247,810 247,675
Less accumulated depreciation 185,044 177,512
$62,766 $70,163
BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT 41