Nordstrom 2002 Annual Report Download - page 30

notes to consolidated
financial statements
28 NORDSTROM INC. AND SUBSIDIARIES
SFAS No. 142 “Goodwill and Other Intangible Assets” - Under SFAS
No. 142, goodwill and intangible assets having indefinite lives will
no longer be amortized but will be subject to annual impairment
tests. Other intangible assets will continue to be amortized over
their estimated useful lives. Adoption of SFAS No. 142 resulted
in an impairment charge and a reduction in amortization expense,
which is detailed in Note 2.
SFAS No. 144 “Accounting for the Impairment or Disposal of
Long-Lived Assets” - SFAS No. 144 retains the fundamental
provisions of SFAS No. 121, but establishes new criteria for asset
classification and broadens the scope of qualifying discontinued
operations. The adoption of this statement did not have a material
impact on our financial statements.
We adopted SFAS No. 145 “Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections” in the second quarter of 2002. SFAS No. 145 updates,
clarifies and simplifies existing accounting pronouncements related
to extinguishments of debt, provisions of the Motor Carrier Act of
1980 and lease transactions. The adoption of this statement did
not have a material impact on our financial statements.
SFAS No. 146 “Accounting for Costs Associated with Exit or
Disposal Activities” was also adopted by us in the second quarter
of 2002. SFAS No. 146 nullifies EITF 94-3 “Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)”
by requiring that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred
versus when an entity is committed to an exit plan. The adoption
of this statement did not have a material impact on our
financial statements.
We adopted SFAS No. 148 “Accounting for Stock-Based
Compensation” in the fourth quarter of 2002. SFAS No. 148
amends SFAS No. 123 of the same name and provides alternative
transition methods for a voluntary change to fair value based
accounting for employee stock compensation. SFAS No. 148
also requires more prominent and frequent disclosures about the
effects of stock-based compensation. Adoption of SFAS No. 148
did not have a material impact on our financial statements.
In November 2002, the Emerging Issues Task Force reached a
consensus on certain issues discussed in EITF 02-16, “Accounting
by a Reseller for Cash Consideration Received from a Vendor.”
This pronouncement addresses the timing and classification
of cash payments received by a reseller from a vendor.
Adoption of EITF 02-16 did not have a material impact on
our financial statements.
In November 2002, the FASB issued FIN 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of the Indebtedness of Others.” FIN 45
elaborates on the disclosures made by a guarantor and also clarifies
that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken
in issuing the guarantee. Adoption of FIN 45 in the fourth quarter
of 2002 did not have a material impact on our financial statements.
Note 2: Cumulative Effect of Accounting Change
Effective February 2002, we adopted SFAS No. 142, “Goodwill
and Other Intangible Assets,” which establishes new accounting
and reporting requirements for goodwill and other intangible assets.
Under SFAS No. 142, goodwill and intangible assets having
indefinite lives will no longer be amortized but will be subject
to annual impairment tests.
In connection with the adoption of SFAS No. 142, we reviewed
the classification and useful lives of our intangible assets.
Our intangible assets were determined to be either goodwill
or indefinite lived tradename.
As required by SFAS No. 142, we defined our reporting unit as
the Façonnable Business Unit, one level below our reportable Retail
Stores segment. We then tested our intangible assets for impairment
by comparing the fair value of the reporting unit with its carrying
value. Fair value was determined using a discounted cash flow
methodology. SFAS No. 142 requires us to perform these
impairment tests at adoption and at least annually thereafter.
We expect to perform our impairment test annually during our
first quarter or when circumstances indicate we should do so.
Our initial impairment test resulted in an impairment charge
to goodwill of $21,900 in the first quarter of 2002, while the
tradename was determined not to be impaired. The goodwill
impairment resulted from a reduction in management’s estimate
of future growth for this reporting unit. The impairment charge
is reflected as a cumulative effect of accounting change.