Napa Auto Parts 2002 Annual Report Download - page 33

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been included in the computation of diluted net (loss) income
per common share since the date of the acquisition.
Reclassifications
Certain reclassifications have been made to prior year amounts
to conform to current year presentation.
Recently Issued Accounting Pronouncements
Effective January 1, 2002, the Company adopted SFAS No. 141,
Business Combinations ("SFAS No. 141"), and SFAS No. 142,
Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No.
141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. SFAS No.
142 requires that entities assess the fair value of the net assets
underlying all acquisition-related goodwill on a reporting unit basis
(see Note 2).
In June 2002, the Financial Accounting Standards Board
(“FASB”) issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (“SFAS No. 146”) which addresses
financial accounting and reporting for costs associated with exit
or disposal activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (includ-
ing Certain Costs Incurred in a Restructuring) (“EITF 94-3”). SFAS
No. 146 requires that a liability for costs associated with an exit
or disposal activity be recognized when the liability is incurred as
opposed to the date of an entity’s commitment to an exit plan.
SFAS No. 146 also establishes fair value as the objective for ini-
tial measurement of the liability. SFAS No. 146 is effective for exit
or disposal activities that are initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, Accounting
for Stock-Based Compensation – Transition and Disclosure
(“SFAS No. 148”). SFAS No. 148 amends SFAS No. 123 to pro-
vide alternative methods of transition to SFAS No. 123’s fair
value method of accounting for stock-based employee compen-
sation. SFAS No. 148 also amends the disclosure provisions of
SFAS No. 123 and Accounting Principles Board Opinion No. 28,
Interim Financial Reporting, to require disclosure in the summary
of significant accounting policies of the effects of an entity’s
accounting policy with respect to stock-based employee compen-
sation on reported net income and earnings per share in annual
and interim financial statements. The disclosure provisions of
SFAS No. 148 are applicable to all companies with stock-based
employee compensation, regardless of whether they account for
that compensation using the fair value method of SFAS No. 123
or the intrinsic value method of APB Opinion No. 25. SFAS No.
148’s amendment of the transition and annual disclosure
requirements of SFAS No. 123 are effective for fiscal years end-
ing after December 15, 2002. The additional disclosures
required under SFAS No. 148 have been included in Note 7.
Beginning on January 1, 2003, the Company will prospectively
account for all future stock compensation awards in accordance
with SFAS No. 123’s fair value method. The adoption of the pre-
ferred recognition provisions of SFAS No. 123 is not expected to
have a material impact on the Company’s financial position or
results of operations in 2003, and the effect on periods there-
after, while entirely dependent on the terms of future stock
compensation awards, is not expected to be significant.
In November 2002, the FASB issued Interpretation Number 45,
Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others (“FIN 45”). FIN 45 requires an entity to disclose in its
interim and annual financial statements information with respect
to its obligations under certain guarantees that it has issued. It
also requires an entity to recognize, at the inception of a guaran-
tee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN 45 are
effective for interim and annual periods ending after December
15, 2002. These disclosures are presented in Note 10. The initial
recognition and measurement requirements of FIN 45 are effec-
tive prospectively for guarantees issued or modified after
December 31, 2002. The Company is currently assessing the
initial measurement requirements of FIN 45. However, manage-
ment does not believe that the recognition requirements will
have a material impact on the Company’s financial position, cash
flows or results of operations.
In January 2003, the FASB issued Interpretation No. 46
Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51 (“FIN 46”). FIN 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the charac-
teristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities with-
out additional subordinated financial support from other parties.
FIN 46 is effective for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities
created or acquired prior to February 1, 2003, the provisions of
FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The Company is currently evalu-
ating the effect that the adoption of FIN 46 will have on its
financial statements.
In January 2003, the Emerging Issues Task Force (“EITF”) of the
FASB issued EITF Issue No. 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a
Vendor (“EITF 02-16”). EITF 02-16 addresses accounting and
reporting issues related to how a reseller should account for
cash consideration received from vendors. Generally, cash con-
sideration received from vendors is presumed to be a reduction
of the prices of the vendor’s products or services and should,
therefore, be characterized as a reduction of cost of sales when
recognized in the customer’s income statement. However, under
certain circumstances this presumption may be overcome and
recognition as revenue or as a reduction of other costs in the
income statement may be appropriate. While the Company does
receive cash consideration from vendors subject to the provisions
of EITF 02-16, the Company has not yet completed its evaluation
of the potential impact on its financial statements. EITF 02-16 is
effective for fiscal periods beginning after December 15, 2002.
2. Goodwill and Other Intangible Assets
Effective January 1, 2002, the Company adopted SFAS No. 141
and SFAS No. 142. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initi-
ated after June 30, 2001. SFAS No. 142 requires that entities
assess the fair value of the net assets underlying all acquisition-
related goodwill on a reporting unit basis effective beginning in
2002. When the fair value is less than the related carrying value,
entities are required to reduce the amount of goodwill.