Coach 2014 Annual Report Download - page 64

TABLE OF CONTENTS
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landlord incentives is recognized on a straight-line basis over the lease term, including any applicable rent holidays, beginning with the lease
commencement date, or the date the Company takes control of the leased space, whichever is sooner. The excess of straight-line rent expense over scheduled
payment amounts and landlord incentives is recorded as a deferred rent liability. As of the end of fiscal 2014 and fiscal 2013, deferred rent obligations of
$135,154 and $117,502, respectively, were classified primarily within other non-current liabilities in the Company's consolidated balance sheets. Certain
rentals are also contingent upon factors such as sales. Contingent rentals are recognized when the achievement of the target (i.e., sale levels), which triggers
the related rent payment, is considered probable and estimable.
Asset retirement obligations represent legal obligations associated with the retirement of a tangible long-lived asset. The Company’s asset retirement
obligations are primarily associated with leasehold improvements that we are contractually obligated to remove at the end of a lease to comply with the lease
agreement. When such an obligation exists, the Company recognizes an asset retirement obligation at the inception of a lease at its estimated fair value. The
asset retirement obligation is recorded in current liabilities or non-current liabilities (based on the expected timing of payment of the related costs) and is
subsequently adjusted for any changes in estimates. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-
lived asset and depreciated over its useful life. As of the end of fiscal 2014 and fiscal 2013, the Company had asset retirement obligations of $18,351 and
$16,497, respectively, primarily classified within other non-current liabilities in the Company's consolidated balance sheets.
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Goodwill and certain other intangible assets deemed to have indefinite useful lives are not amortized, but are assessed for impairment at least annually.
The Company has no finite-lived intangible assets.
The Company uses a quantitative goodwill impairment test, which is a two-step process. The first step is to identify the existence of potential impairment
by comparing the fair value of each reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value,
the reporting unit's goodwill is considered not to be impaired and performance of the second step of the quantitative goodwill impairment test is unnecessary.
If the carrying value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of
impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying
value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized
in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill that would be recognized
in a business combination. In other words, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit as if the reporting unit
had been acquired in a business combination and the fair value was the purchase price paid to acquire the reporting unit.
Determination of the fair value of a reporting unit and the fair value of individual assets and liabilities of a reporting unit is judgmental in nature and
often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an
impairment charge is recognized and the amount of any such charge. Estimates of fair value are primarily determined using discounted cash flows, market
comparisons, and recent transactions. These approaches use significant estimates and assumptions, including projected future cash flows, discount rates,
growth rates, and determination of appropriate market comparables.
The Company performs its annual impairment assessment of goodwill during the fourth quarter of each fiscal year. The Company determined that there
was no impairment in fiscal 2014, fiscal 2013 or fiscal 2012 as the fair values of our reporting units significantly exceeded their respective carrying values.
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Coach accounts for stock repurchases and retirements by allocating the repurchase price to common stock and retained earnings. The repurchase price
allocation is based upon the equity contribution associated with historical issuances, beginning with the earliest issuance. Under Maryland law, Coach’s state
of incorporation, treasury shares are not allowed. As a result, all repurchased shares are retired when acquired. During the second quarter of fiscal 2008, the
Company’s total cumulative stock repurchases exceeded the total shares issued in connection with the Company’s October 2000 initial public offering, and
stock repurchases in excess of this amount are assumed to be made from the Company’s April 2001 Sara Lee exchange offer. Shares issued in connection with
this exchange offer were accounted for as a contribution to common stock and retained earnings. Therefore, stock repurchases and retirements associated with
the exchange offer are accounted for by allocation of the repurchase price to common stock and retained earnings. During the fourth quarter of fiscal 2010,
cumulative stock repurchases allocated to retained earnings resulted in an accumulated deficit balance. Since its initial public offering, the Company has not
experienced a net loss in any fiscal year,
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