Neiman Marcus 2009 Annual Report Download - page 108

Table of Contents
Recent Accounting Pronouncements. In December 2007, the FASB issued guidance that addresses the recognition and
accounting for identifiable assets acquired, liabilities assumed and non-controlling interests in business combinations. In addition, this
guidance 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. These rules are to be applied prospectively to
business combinations for which the acquisition date is on or after December 15, 2008. Generally, the effect of this guidance will
depend on future acquisitions. However, the accounting for the resolution of any tax uncertainties remaining as of July 31, 2010
related to the Acquisition will be subject to the provisions of this guidance. As to the future resolution of these tax uncertainties, we
do not believe these requirements will have a material impact on our future financial statements.
In February 2008, the FASB issued guidance that currently requires disclosure related to the fair values of 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. We adopted this guidance during the first quarter of fiscal year 2010. However, the adoption of
this guidance does not currently result in additional required disclosures in our consolidated financial statements for fiscal year 2010.
In June 2009, the FASB issued guidance that establishes the Accounting Standards Codification (ASC) as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with generally accepted accounting principles. This guidance is effective for financial statements issued for
interim and annual periods ending after September 15, 2009, or our first quarter of fiscal year 2010 ending October 31, 2009. The
adoption of this guidance did not have an impact on our consolidated financial statements.
In December 2008 and January 2010, the FASB issued guidance related to improving disclosures about fair value
measurements. This guidance requires reporting entities to make new disclosures about recurring and nonrecurring fair value
measurements with respect to assets held by pension plans, as well as other assets and liabilities. Such disclosure requirements
include disclosures related to significant transfers into and out of Level 1 and Level 2 fair value measurements and information on
purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. We adopted this
guidance in the preparation of our consolidated financial statements for the fiscal year ending July 31, 2010 and expanded our
disclosures regarding plan assets, the basis of determination of the fair value of these assets and provided additional information
regarding activity related to our Level 3 investments.
NOTE 2. TRANSACTIONS WITH SPONSORS
Pursuant to a management services agreement with affiliates of the Sponsors, and in exchange for ongoing consulting and
management advisory services that are provided to us by the Sponsors and their affiliates, affiliates of the Sponsors receive an
aggregate annual management fee equal to the lesser of (i) 0.25% of our consolidated annual revenues or (ii) $10 million. Affiliates of
the Sponsors also receive reimbursement for out-of-pocket expenses incurred by them or their affiliates in connection with services
provided pursuant to the agreement. These management fees are payable quarterly in arrears. We recorded management fees of $9.2
million during fiscal year 2010, $9.1 million during fiscal year 2009 and $10.0 million during fiscal year 2008, which are included in
selling, general and administrative expenses in the consolidated statements of operations.
The management services agreement also provides that affiliates of the Sponsors may receive future fees in connection with
certain future financing and acquisition or disposition transactions. The management services agreement includes customary
exculpation and indemnification provisions in favor of the Sponsors and their affiliates.
NOTE 3. INCOME FROM CREDIT CARD PROGRAM, NET
We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation
(collectively referred to as HSBC). Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our
customers under both the "Neiman Marcus" and "Bergdorf Goodman" brand names. Our original program agreement with HSBC was
scheduled to expire in July 2010. We have subsequently entered into an agreement with HSBC to extend the program to July 2015
(renewable thereafter for three-year terms). We refer to the agreement with HSBC, including as extended, as the Program Agreement.
Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all
credit risk with respect to sales transacted on the cards bearing our brands. We receive payments from HSBC based on sales
transacted on our proprietary credit cards. Such payments are subject to revisions, both increases and decreases,
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