Neiman Marcus 2009 Annual Report Download - page 50

Table of Contents
end of each fiscal year. In the third quarter of fiscal year 2010, we froze benefits offered to all remaining employees under our
Pension Plan and SERP Plan.
Significant assumptions related to the calculation of our obligations include the discount rate used to calculate the present
value of benefit obligations to be paid in the future, the expected long-term rate of return on assets held by the Pension Plan and the
health care cost trend rate for the Postretirement Plan. We review these assumptions annually based upon currently available
information, including information provided by our actuaries.
Significant assumptions utilized in the calculation of our projected benefit obligations as of July 31, 2010 and future expense
requirements for our Pension Plan, SERP Plan and Postretirement Plan, and sensitivity analysis related to changes in these
assumptions, are as follows:
Using Sensitivity Rate
Actual
Rate
Sensitivity Rate
Increase/(Decrease)
Increase in
Liability
(in millions)
Increase/
(Decrease) in
Expense
(in millions)
Pension Plan:
Discount rate 5.20% (0.25)% $ 18.4 $ 0.3
Expected long-term rate of return on plan
assets 8.00% (1.00)% N/A $ 3.3
SERP Plan:
Discount rate 5.20% (0.25)% $ 2.9 $ (0.1)
Postretirement Plan:
Discount rate 5.10% (0.25)% $ 0.6 $ 0.1
Ultimate health care cost trend rate 8.00% 1.00% $ 2.4 $ 0.1
Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets
and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We are routinely under audit
by federal, state or local authorities in the area of income taxes. We regularly evaluate the likelihood of realization of tax benefits
derived from positions we have taken in various federal and state filings after consideration of all relevant facts, circumstances and
available information. For those tax benefits we believe more likely than not will be sustained, we recognize the benefit we believe is
cumulatively greater than 50% likely to be realized. To the extent we were to prevail in 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 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
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