Hibbett Sports 2007 Annual Report Download - page 50

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Fair Value of Financial Instruments
We believe that the carrying amount approximates fair value for cash and cash equivalents, short-term
investments, receivables and accounts payable, because of the short maturities of those instruments.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines
fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements;
however, SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently
evaluating the impact, if any, that SFAS No. 157 will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS No. 158
requires recognition of the overfunded or underfunded status of defined benefit postretirement plans as an asset or
liability in the statement of financial position and recognition of changes in that funded status in comprehensive
income in the year in which the changes occur. SFAS No. 158 also requires measurement of the funded status of a
plan as of the date of the statement of financial position. SFAS No. 158 is effective for recognition of the funded
status of the benefit plans for fiscal years ending after December 15, 2006 and is effective for the measurement date
provisions for fiscal years ending after December 15, 2008. The adoption of SFAS No. 158 will not have a material
effect on the Company’s consolidated financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108
provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. SAB No. 108 establishes an approach that requires
quantification of financial statement errors based on the effects on each of the Company’s balance sheet, statement
of operations and related financial statement disclosures. The SAB permits the recording of the cumulative effect of
initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting
adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting
adjustments recorded to the opening balance of retained earnings. SAB No. 108 is effective for fiscal 2007. The
adoption of SAB No. 108 did not have a material effect on the Company’s consolidated financial statements.
In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109.” FIN No. 48 clarifies the accounting for uncertainty in income
taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income
Taxes,” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. Under FIN No. 48, the financial
statement effects of a tax position should initially be recognized when it is more-likely-than-not, based on the
technical merits, that the position will be sustained upon examination by the taxing authority. A tax position that
meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest
amount of tax benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with a
taxing authority. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. We do not expect the
adoption of FIN No. 48 to have a material effect on our consolidated financial statements.
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which requires that
companies recognize the grant-date fair value of stock options and other equity-based compensation issued to
employees as an expense in the income statement. SFAS No. 123R generally requires that companies account for
those transactions using the fair-value-based method, and eliminates using the intrinsic value method of accounting
in Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees.” In March 2005, the SEC
issued SAB No. 107, “Share-Based Payment,” which provided the staff’s views regarding the interaction between
SFAS No. 123R and certain SEC rules and regulations and also the valuation of share-based payment arrangements
for public companies. The Company adopted SFAS No. 123R effective January 29, 2006 using the modified
prospective transition method. This method requires that compensation cost be recognized on or after the required
effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based
on the grant date fair value of those awards. The impact of SFAS No. 123R on the Company’s consolidated
statement of operations in fiscal 2007 and beyond will depend upon various factors, including the amount of awards
granted and the fair value of those awards at the time of grant. The Company incurred an incremental expense of
$2.8 million, or approximately $0.07 per diluted share, during the 53 weeks ended February 3, 2007 as a result of the
adoption of SFAS No. 123R. See “Stock-Based Compensation” in Note 3 to the Consolidated Financial Statements in
Item 8.