GNC 2008 Annual Report Download - page 60

Table of Contents
In addition to the obligations scheduled above, we have entered into employment agreements with certain executives that provide for
compensation and certain other benefits. Under certain circumstances, including a change of control, some of these agreements provide for
severance or other payments, if those circumstances would ever occur during the term of the employment agreement.
Off Balance Sheet Arrangements
As of December 31, 2007 and 2006, we had no relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off balance sheet
arrangements, or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market, or
credit risk that could arise if we had engaged in such relationships.
We have a balance of unused barter credits on account with a third-party barter agency. We generated these barter credits by
exchanging inventory with a third-party barter vendor. In exchange, the barter vendor supplied us with barter credits. We did not record a sale
on the transaction as the inventory sold was for expiring products that were previously fully reserved for on our balance sheet. In accordance
with the SFAS 153, "Exchange of Nonmonetary Assets- an amendment of APB Opinion No 29", a sale is recorded based on either the value
given up or the value received, whichever is more easily determinable. The value of the inventory was determined to be zero, as the inventory
was fully reserved. Therefore, these credits were not recognized on the balance sheet and are only realized when we purchase services or
products through the bartering company. The credits can be used to offset the cost of purchasing services or products. As of December 31,
2007 and 2006, the available credit balance was $8.5 million. The barter credits are available for use through March 31, 2009.
Effect of Inflation
Inflation generally affects us by increasing costs of raw materials, labor, and equipment. We do not believe that inflation had any material
effect on our results of operations in the periods presented in our consolidated financial statements.
Critical Accounting Estimates
You should review the significant accounting policies described in the notes to our consolidated financial statements under the heading
Basis of Presentation and Summary of Significant Accounting Policies'' included elsewhere in this report.
Use of Estimates
Certain amounts in our financial statements require management to use estimates, judgments, and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods
presented. Our accounting policies are described in the notes to our consolidated financial statements under the heading Basis of Presentation
and Summary of Significant Accounting Policies'' included elsewhere in this report. Our critical accounting policies and estimates are described
in this section. An accounting estimate is considered critical if:
• the estimate requires management to make assumptions about matters that were uncertain at the time the estimate was made;
• different estimates reasonably could have been used; or 56