LensCrafters 2009 Annual Report Download - page 61

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59 <
NOTES
TO CONSOLIDATED
FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Luxottica Group S.p.A. and its subsidiaries (collectively "Luxottica Group" or the "Com-
pany") operate in two industry segments: (1) manufacturing and wholesale distribution and (2) retail distri-
bution.
Through its manufacturing and wholesale distribution operations, Luxottica Group is engaged in the de-
sign, manufacturing, wholesale distribution and marketing of house brand and designer lines of mid to
premium-priced prescription frames and sunglasses, and, with the acquisition of Oakley Inc. ("Oakley")
in November 2007, the Company, through various Oakley subsidiaries, is a designer, manufacturer, and
worldwide distributor of performance optics products.
Through its retail operations, as of December 31, 2009, the Company owned and operated 5,682 retail
locations worldwide (5,695 locations at December 31, 2008) and franchised an additional 535 locations
(560 locations at December 31, 2008) principally through Luxottica Retail North America, Inc., Sunglass Hut
Trading, LLC, OPSM Group Limited, and Oakley. The retail division of Oakley ("O" retail) consists of owned
retail locations operating under various names including "O" stores which sell apparel and other Oakley
branded merchandise in addition to performance sunglasses.
Luxottica Group’s net sales consist of direct sales of fi nished products manufactured under its own brand
names or licensed brands to opticians and other independent retailers through its wholesale distribution
channels and direct sales to consumers through its retail distribution segment.
Demand for the Company’s products, particularly the higher-end designer lines, is largely dependent on
the discretionary spending power of the consumers in the markets in which the Company operates.
The retail division’s fi scal year is a 52- or 53-week period ending on the Saturday nearest December 31. The
accompanying consolidated fi nancial statements include the operations of the North America retail divi-
sion for the 52-week period ended January 2, 2010, for the 53-week period ended January 3, 2009 and for
the 52-week period ended December 29, 2007 respectively. In 2009, the fi scal year for the retail distribution
divisions in Asia-Pacifi c (China, Hong Kong, Australia, New Zealand, Thailand, India and the Philippines)
and South Africa included 53 weeks.
Principles of Consolidation and Basis of Presentation - The consolidated fi nancial statements of Lux-
ottica Group include the fi nancial statements of the parent company and all wholly or majority-owned
subsidiaries. The principles of the Accounting Standards Codifi cation ("ASC") No. 810, Consolidation are
considered when determining whether an entity is subject to consolidation. During 2008, the Company
acquired through one of its subsidiaries an additional 16 percent interest in an affi liated company in which
it previously held a 50 percent interest. Until the time that the Company became the majority shareholder,
this investment was accounted for under the equity method. During 2009 the Company acquired 40% of
Multiopticas Internacional S.L., a company that owns over 390 eyewear stores operating under the GMO,
Econoptics and SunPlanet retail brands in Chile, Peru, Ecuador and Colombia. This investment is account-
ed for under the equity method in the consolidated fi nancial statements. Investments in other companies
in which the Company has less than a 20 percent interest with no ability to exercise signifi cant infl uence
are carried at cost. All intercompany accounts and transactions are eliminated in consolidation. Luxottica
Group prepares its consolidated fi nancial statements in accordance with accounting principles generally
accepted in the United States of America ("US GAAP").
The Company accounts for all business combinations in accordance with ASC No. 805, Business Combi-
nations. Furthermore, the Company recognizes intangible assets apart from goodwill if they arise from
contractual or legal rights or if they are separable from goodwill.
Use of Estimates - The preparation of fi nancial statements in conformity with US GAAP requires manage-
ment to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported
amounts of revenues and expenses during the reporting period. Signifi cant judgment and estimates are