DSW 2014 Annual Report Download - page 55

Table of Contents
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liabilities, revenues, and expenses of discontinued operations. The Company does not expect that its financial statements or disclosures will be impacted.
In May 2014, the FASB and the International Accounting Standards Board released standard No. 2014-09 on the recognition of revenue from contracts with
customers that is designed to create greater comparability for financial statement users across industries and jurisdictions. Under the new standard, companies
will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled
in exchange for those goods or services. The standard also will require enhanced disclosures and provide more comprehensive guidance for transactions such
as service revenue and contract modifications. The standard will take effect for public companies for annual reporting periods beginning after December 15,
2016, including interim reporting periods. The Company is currently in process of evaluating the impact of the new standard on its financial statements and
disclosures.
In June 2014, the FASB issued standard No. 2014-12, which provided final guidance that a performance target that affects vesting of a share-based payment
and that could be achieved after the requisite service period is a performance condition under ASC 718, Stock Compensation. As a result, the target is not
reflected in the estimation of the award's grant date fair value. Compensation costs for such an award would be recognized over the required service period, if
it is probable that the performance condition will be achieved. The guidance is effective for all entities for annual reporting periods beginning after December
15, 2015 and interim periods within those annual periods. Early adoption is permitted. The guidance should be applied on a prospective basis to awards that
are granted or modified on or after the effective date. The Company will not be affected by this guidance as the Company currently accounts for these awards
in a manner consistent with the new guidance.
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Schottenstein Affiliates- As of January 31, 2015, the Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the executive chairman
of the DSW board of directors, and members of his family, beneficially owned approximately 17% of outstanding DSW Common Shares representing
approximately 49% of the combined voting power of outstanding DSW Common Shares. As of January 31, 2015, the Schottenstein Affiliates beneficially
owned 7.3 million Class A Common Shares and 7.7 million Class B Common Shares.
The Company leases certain store locations owned by Schottenstein Affiliates and purchases services and products from Schottenstein Affiliates. Accounts
receivable from and payables to affiliates principally result from commercial transactions or affiliate transactions and normally settle in the form of cash in 30
to 60 days. Related party balances are disclosed on the consolidated balance sheets.
Corporate Office Headquarters and Distribution Center Acquisition- In fiscal 2012, DSW Inc. acquired 810 AC LLC, an Ohio limited liability company
from certain Schottenstein affiliates, which owned property that was previously leased by DSW Inc. for its corporate office headquarters, its distribution
center and a trailer parking lot. DSW Inc. leases certain portions of the properties to unrelated and related parties. DSW Inc. paid to sellers $72 million in cash,
subject to credits and adjustments, for 810 AC LLC. As this was a transaction between entities under common control, as provided by ASC 805, there was no
adjustment to the historical cost carrying amounts of assets transferred to DSW Inc. The difference between the historical cost carrying amounts and the
consideration of $72 million transferred was an equity transaction. DSW Inc. also reduced the cost basis of the assets by the balance of tenant allowances and
deferred rent recorded related to the properties. DSW Inc. received a step-up of tax basis to $72 million and the resulting tax effect, the difference between the
financial reporting basis and tax basis, was also recorded to equity. In the first quarter of fiscal 2013, DSW Inc. recorded an adjustment to the tax impact of
$3.3 million as a prior period adjustment between non-current deferred tax assets and basis difference related to acquisition of commonly controlled entity.
On November 1, 2012, in connection the acquisition, 4300 East Fifth Avenue LLC, a Schottenstein affiliate, and DSW Inc.'s new wholly owned subsidiary,
810 AC LLC, entered into a cost sharing agreement (the “Cost Sharing Agreement”). In fiscal 2013, DSW Inc. contributed $3 million to replace the roof of
one of the 810 AC LLC properties.
Also on November 1, 2012, 810 AC LLC and Schottenstein Property Group, LLC (“SPG”), a Schottenstein affiliate, entered into a management agreement
(the “Management Agreement”) pursuant to which SPG provides management and landlord, operation, repair, maintenance, replacement, and supervision
services with respect to the properties owned by 810 AC LLC. As compensation, DSW Inc. pays SPG 4% of rents, or approximately $0.2 million on an annual
basis. The term of the Management Agreement is three years, with automatic one year extensions after the initial term. The Management Agreement can be
terminated by either party with 60 days notice.
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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