Neiman Marcus 2008 Annual Report Download - page 52

Table of Contents
matters for which accruals have been established or be required to pay amounts in excess of recorded reserves, our effective tax rate in
a given financial statement period could be materially impacted.
Recent Accounting Pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), "Business Combinations"
(SFAS 141(R)), which addresses the recognition and accounting for identifiable assets acquired, liabilities assumed and non-
controlling interests in business combinations. In addition, SFAS 141(R) changes the accounting treatment for certain acquisition-
related items, including requirements to expense acquisition-related costs as incurred, expense restructuring costs associated with an
acquired business and recognize post-acquisition changes in tax uncertainties associated with a business combination as a component
of tax expense. SFAS 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after
December 15, 2008, or our fiscal year ending July 31, 2010. Generally, the effect of SFAS 141(R) will depend on future acquisitions.
However, the accounting for the resolution of any tax uncertainties remaining as of August 1, 2009 related to the Acquisition will be
subject to the provisions of SFAS 141(R).
In February 2008, the FASB issued FASB Staff Position 157-2, "Effective Date of FASB Statement No. 157" (FSP 157-2),
which delays the effective date of fair value disclosures required by SFAS 157 for all nonfinancial assets, such as intangible assets and
goodwill, and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.
FSP 157-2 is effective for fiscal years beginning after November 15, 2008, or our fiscal year ending July 31, 2010. We have not yet
evaluated the impact of adopting FSP 157-2 on our consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position 132(R)-1, "Employers' Disclosures about Postretirement Benefit
Plan Assets" (FSP 132(R)-1), which provides guidance on an employer's disclosures about plan assets of a defined benefit pension or
other postretirement plan. FSP 132(R)-1 is effective for fiscal years ending after December 15, 2009, or our fiscal year ending
July 31, 2010. We have not yet evaluated the impact of adopting the disclosure requirements of FSP 132(R)-1.
In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, "Subsequent Events" (SFAS 165),
which establishes general standards of accounting and disclosure for events that occur after the balance sheet date but before financial
statements are issued, including the required disclosure of the date through which subsequent events have been evaluated and the basis
for that date. SFAS 165 is effective for interim or annual periods ending after June 15, 2009. We adopted SFAS 165 during the fourth
quarter of fiscal year 2009, as more fully described in Note 1 "Basis of Presentation."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company's financial instruments represents the potential loss arising from adverse changes in
interest rates. The Company does not enter into derivative financial instruments for trading purposes. The Company seeks to manage
exposure to adverse interest rate changes through its normal operating and financing activities. The Company is exposed to interest
rate risk through its borrowing activities, which are described in Note 9 to our consolidated financial statements.
In connection with the Acquisition, NMG obtained $2,575.0 million of floating rate debt agreements, of which $2,125.0
million was outstanding at the Acquisition date and $1,625.0 million is outstanding under its Senior Secured Term Loan Facility at
August 1, 2009 (including $26.6 million of borrowings classified as current liabilities). In addition, as of August 1, 2009, NMG had
no borrowings outstanding under its Asset-Based Revolving Credit Facility. Future borrowings under NMG's Asset-Based Revolving
Facility, to the extent of outstanding borrowings, would be affected by interest rate changes.
Effective December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional
amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness. These
swap agreements hedge a portion of our contractual floating rate interest commitments through the expiration of the agreements in
December 2010. As a result of the swap agreements, NMG's effective fixed interest rates as to the $1,000.0 million in floating rate
indebtedness will currently range from 6.831% to 6.983% per quarter through 2010 and
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