Dillard's 2005 Annual Report Download - page 34

New Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial
Accounting Standards (“SFAS”) No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4” (“SFAS
No. 151”). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage).
SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The
adoption of SFAS No. 151 is not expected to have a material effect on the Company’s financial position, results
of operations or cash flows.
In December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (“SFAS
No. 123-R”). SFAS No. 123-R requires all forms of share-based payment to employees, including employee
stock options, be treated as compensation and recognized in the income statement based on their estimated fair
values. This statement will be effective for fiscal years beginning after June 15, 2005.
The Company currently accounts for stock options under APB No. 25 using the intrinsic value method in
accounting for its employee stock options. No stock-based compensation costs were reflected in net income, as
no options under those plans had an exercise price less than the market value of the underlying common stock on
the date of grant.
Under the adoption of SFAS No. 123-R, the Company will be required to expense stock options over the
vesting period in its statement of operations. In addition, the Company will need to recognize expense over the
remaining vesting period associated with unvested options outstanding as of January 28, 2006. Based on the
stock options outstanding as of January 28, 2006, the stock-based employee compensation expense, net of related
tax effects, will be approximately $0.6 million in fiscal 2006.
In March 2005, the FASB issued FASB Interpretation No. 47 (“FIN 47”), “Accounting for Conditional
Asset Retirement Obligations, an interpretation of FASB Statement No. 143.” FIN 47 clarifies the scope and
timing of liability recognition for conditional asset retirement obligations under SFAS No. 143 and is effective
no later than the end of our 2005 fiscal year. The adoption of FIN 47 did not have a material impact on our
consolidated financial position, results of operations or cash flows.
In May 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Correction, a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 changes the
requirements for the accounting for and reporting of a change in accounting principle. This statement requires
retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS
No. 154 is effective for accounting changes and errors made in fiscal years beginning after December 15, 2005.
The adoption of SFAS No. 154 is not expected to have a material effect on the Company’s financial position,
results of operations or cash flows.
Forward-Looking Information
The foregoing contains certain “forward-looking statements” within the definition of federal securities laws.
Statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations
include certain “forward-looking statements,” including (without limitation) statements with respect to
anticipated future operating and financial performance, growth and acquisition opportunities, financing
requirements and other similar forecasts and statements of expectation. Words such as “expects,” “anticipates,”
“plans” and “believes,” and variations of these words and similar expressions, are intended to identify these
forward-looking statements. Statements made regarding the Company’s merchandise strategies, funding of
cyclical working capital needs, store opening schedule and estimates of depreciation and amortization, rental
expense, interest and debt expense and capital expenditures for fiscal year 2006 are forward-looking statements.
The Company cautions that forward-looking statements, as such term is defined in the Private Securities
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