Redbox 2007 Annual Report Download - page 54

We are generally not subject to income tax examination in jurisdictions within the United States for years prior
to 1995. For non United States jurisdictions, we are generally not subject to income tax examination for years prior
to 1998.
Research and development: Costs incurred for research and development activities are expensed as incurred.
Software costs developed for internal use are accounted for under Statement of Position (“SOP”) 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use.
Recent accounting pronouncements: In September 2006, the FASB issued FASB Statement No. 157, Fair
Value Measures (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and
enhances disclosures about fair value measures required under other accounting pronouncements, but does not
change existing guidance as to whether or not an instrument is carried at fair value. The effective date of SFAS 157
for nonfinancial assets and liabilities has been delayed by one year to fiscal years beginning after November 15,
2008. We are currently reviewing the provisions of SFAS 157 to determine the impact to our Consolidated Financial
Statements.
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities — including an amendment to FASB Statement No. 115 (“SFAS 159”). Under SFAS 159,
entities may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a
contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election,
called the fair value option, will enable entities to achieve an offset accounting effect for changes in fair value of
certain related assets and liabilities without having to apply complex hedge accounting provisions. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The adoption of the provisions of SFAS 159 is not
expected to have a material impact to our Consolidated Financial Statements.
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations
(“SFAS 141R”). SFAS 141R, retains the fundamental requirements of Statement No. 141 to account for all business
combinations using the acquisition method (formerly the purchase method) and for an acquiring entity to be
identified in all business combinations. However, the new standard requires the acquiring entity in a business
combination to recognize all the assets acquired and liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to disclose the information they need to evaluate and understand the nature and financial effect
of the business combination. SFAS 141R is effective for acquisition made on or after the first day of annual periods
beginning on or after December 15, 2008. We are currently reviewing the provisions of SFAS 141R to determine the
impact to our Consolidated Financial Statements.
In December 2007, the FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements — An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
SFAS 160 is effective for annual periods beginning on or after December 15, 2008. We are currently reviewing the
provisions of SFAS 160 to determine the impact to our Consolidated Financial Statements.
Reclassifications: Certain reclassifications have been made to the prior year amounts to conform to the
current year presentation.
NOTE 3: ACQUISITIONS
In connection with our acquisitions, we have allocated the respective purchase prices plus transaction costs to
the estimated fair values of the tangible and intangible assets acquired and liabilities assumed. These purchase price
allocation estimates were based on our estimates of fair values.
Video Vending New York, Inc. (d.b.a. “DVDXpress”): In 2005, we entered into a credit agreement, which was
subsequently amended, to provide DVDXpress with a credit facility to provide up to $9.9 million in financing. In
addition, we signed an asset purchase option agreement in 2005 and on September 27, 2007, we provided notice of
exercise of the option and acquired substantially all of DVDXpress’ assets and certain liabilities in exchange for a
cash payment of $2.7 million, their outstanding debt and accrued interest of $8.4 million on the credit facility plus
contingent consideration up to $1.0 million based on the achievement of specific conditions. In December 2007, the
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