Hibbett Sports 2005 Annual Report Download - page 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting for the Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have occurred that indicate the
remaining balance of long-lived assets and intangibles may be impaired and not recoverable. The
Company’s policy is to recognize any impairment loss on long-lived assets as a charge to current income
when certain events or changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Impairment is assessed considering the estimated undiscounted cash flows over the
asset’s remaining life. If estimated cash flows are insufficient to recover the investment, an impairment
loss is recognized based on a comparison of the cost of the asset to fair value less any costs of disposition.
Recent Accounting Pronouncements
In December 2003, the FASB issued Interpretation No. 46 (revised 2003), “Consolidation of Variable
Interest Entities,” (FIN 46R), which addresses how a business enterprise should evaluate whether it has
a controlling financial interest in an entity through means other than voting rights and accordingly should
consolidate the entity. FIN 46R replaces Interpretation 46, “Consolidation of Variable Interest Entities,”
which was issued in January 2003. The Company was required to apply FIN 46R to variable interests in
variable interest entities (“VIEs”) created after December 31, 2003. For variable interests in VIEs created
before January 1, 2004, the Interpretation was applied beginning on January 1, 2005. For any VIEs that
must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities
and non-controlling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest
being recognized as the cumulative effect of an accounting change. If determining the carrying amounts
is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities
and non-controlling interest of the VIE. There was no impact to the Company’s consolidated financial
statements upon adoption.
SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity,” was issued in May 2003. This Statement establishes standards for the classification and
measurement of certain financial instruments with characteristics of both liabilities and equity. The
Statement also includes required disclosures for financial instruments within its scope. For the
Company, the Statement was effective for instruments entered into or modified after May 31, 2003 and
otherwise was effective at the beginning of the first interim period beginning after June 15, 2003, except
for mandatorily redeemable financial instruments. For certain mandatorily redeemable financial instruments,
the Statement will be effective for the Company on January 31, 2005. The effective date has been
deferred indefinitely for certain other types of mandatorily redeemable financial instruments. The
Company currently does not have any financial instruments that are within the scope of this Statement.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs.” SFAS No. 151 amends the
guidance in Accounting Research Bulletin No. 43, “Inventory Pricing,” to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs and wasted material (spoilage). SFAS No. 151
requires that those items be recognized as current period charges and that the allocation of fixed
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