Coach 2006 Annual Report Download - page 36

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In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)
155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements 133 and 140.” SFAS 155 permits fair
value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This
statement is effective for all financial instruments acquired or issued after July 1, 2007. The Company does not expect the adoption of SFAS
155 to have a material impact on the Company’s consolidated financial statements.
In June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force (“EITF”) Issue 06-3, “How Taxes Collected
From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net
Presentation).” EITF 06-3 requires disclosure of a company’s accounting policy with respect to presentation of taxes collected on a revenue
producing transaction between a seller and a customer. For taxes that are reported on a gross basis (included in revenues and costs), EITF
06-3 also requires disclosure of the amount of taxes included in the financial statements. EITF 06-3 was effective for the interim reporting
period that began on December 31, 2006. As the Company did not modify its accounting policy of recording sales taxes collected on a net
basis, the adoption of EITF 06-3 did not have an impact on the Company’s consolidated financial statements.
In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109,”
which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS
109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for the fiscal year beginning
on July 1, 2007. The Company is currently evaluating the impact of FIN 48 on the Company’s consolidated financial statements.
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement
is effective for the fiscal year beginning on July 1, 2007. The Company does not expect the adoption of SFAS 157 to have a material impact
on the Company’s consolidated financial statements.
In September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS 158 requires an employer to recognize the funded status
of a benefit plan, measured as the difference between plan assets at fair value and the projected benefit obligation, in its statement of
financial position. SFAS 158 also requires an employer to measure defined benefit plan assets and obligations as of the date of the
employer’s fiscal year-end statement of financial position. This statement is effective as of the end of the
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fiscal year ended June 30, 2007, except for the requirement to measure plan assets and obligations as of the date of the employer’s fiscal year-
end statement of financial position, which is effective for the fiscal year ending June 27, 2009. The impact of adopting SFAS 158 is
described in Note 12.
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements
When Quantifying Misstatements in Current Year Financial Statements.” SAB 108 states that SEC registrants should use both a balance
sheet approach and an income statement approach when quantifying and evaluating the materiality of a misstatement, contains guidance on
correcting errors under the dual approach and provides transition guidance for correcting errors existing in prior years. SAB 108 is effective
for annual financial statements covering the fiscal year ended June 30, 2007. The adoption of SAB 108 did not have an impact on the
Company’s consolidated financial statements.
In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an
amendment of FASB Statement No. 115.” SFAS 159 permits entities to choose to measure many financial instruments and certain other
items at fair value. This statement is effective for the fiscal year beginning June 29, 2008. The Company does not expect the adoption of
SFAS 159 to have a material impact on the Company’s consolidated financial statements.
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In March 2007, the Company exited its corporate accounts business in order to better control the location and image of the brand where
Coach product is sold. Through the corporate accounts business, Coach sold products primarily to distributors for gift-giving and incentive
programs. The results of the corporate accounts business, previously included in the Indirect segment, have been segregated from continuing
operations and reported as discontinued operations in the Consolidated Statements of Income for all periods presented. As the Company uses
a centralized approach to cash management, interest income was not allocated to the corporate accounts business. The following table
summarizes results of the corporate accounts business:
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