LensCrafters 2009 Annual Report Download - page 64

Download and view the complete annual report

Please find page 64 of the 2009 LensCrafters annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

> 62 | ANNUAL REPORT 2009
Store Opening and Closing Costs - Store opening costs are charged to operations as incurred in accord-
ance with ASC No. 720, Other Expenses. The costs associated with closing stores or facilities are recorded
at fair value as the related liabilities are incurred. Store closing costs charged to the consolidated state-
ments of income during fi scal years 2009, 2008 and 2007 were not material.
Self Insurance - The Company is self insured for certain losses relating to workers’ compensation, general
liability, auto liability, and employee medical benefi ts for claims fi led and for claims incurred but not re-
ported. The Company’s liability is estimated on an undiscounted basis using historical claims experience
and industry averages; however, the fi nal cost of the claims may not be known for over fi ve years. As of
December 31, 2009 and 2008, self insurance accruals were Euro 39.7 million and Euro 43.2 million, respec-
tively.
Income Taxes - Income taxes are recorded in accordance with ASC No. 740, Income Taxes, which requires
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that
have been included in the Company's consolidated fi nancial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference between the consolidated fi nan-
cial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. A valuation allowance is recorded for deferred tax assets if it is
determined that it is more likely than not that the asset will not be realized. Changes in valuation allow-
ances from period to period are included in the tax provisions in the relevant period of change.
As of January 1, 2007, the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 ("FIN 48"), which is now included in ASC No. 740. FIN 48 pro-
vides that a tax benefi t from an uncertain tax position may be recognized when it is more likely than not
that the position will be sustained upon examination, including resolutions of any related appeals or litiga-
tion processes, based on the technical merits. In addition, it provides additional requirements regarding
measurement, de-recognition, disclosure, interest and penalties and classifi cation. FIN 48 must be applied
to all existing tax positions for all open tax periods as of the date of adoption (see Note 8 for a tabular
reconciliation of uncertain tax positions). The cumulative effect of adoption of FIN 48 of Euro 8.1 million was
recorded as a reduction to retained earnings on the date of adoption.
The Company recognizes interest and penalties related to unrecognized tax benefi ts within the income tax
expense line in the accompanying consolidated statements of income. Accrued interest and penalties are
included within the related tax liability in the consolidated balance sheet.
Liability for Termination Indemnities - The reserve for employee termination indemnities of Italian com-
panies was considered a defi ned benefi t plan through December 31, 2006 and was accounted for accord-
ingly. Effective January 1, 2007, the Italian employee termination indemnity system was reformed, and
such indemnities are subsequently accounted for as a defi ned contribution plan. Termination indemnities
in other countries are provided through payroll tax and other social contributions in accordance with local
statutory requirements.
Revenue Recognition - Revenues include sales of merchandise (both wholesale and retail), insurance and
administrative fees associated with the Company’s managed vision care business, eye exams and related
professional services, and sales of merchandise to franchisees along with other revenues from franchisees
such as royalties based on sales and initial franchise fee revenues. Excluded from revenues and recorded
net in expenses when applicable are amounts collected from customers and remitted to governmental
authorities for taxes directly related to the revenue-producing transaction.
Revenue is recognized when it is realized or realizable and earned. Revenue is considered to be realized
or realizable and earned when there is persuasive evidence of an arrangement, delivery has occurred, the
sales price is fi xed or determinable and collectability is reasonably assured.
Manufacturing and wholesale distribution segment revenues are recognized from sales of products at
the time of shipment, as title and the risks and rewards of ownership of the goods are assumed by the