Saks Fifth Avenue 2008 Annual Report Download - page 40

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities” (“SFAS No. 161”). This Statement amends and expands the disclosure requirements of SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), to require an entity
to provide an enhanced understanding of its use of derivative instruments, how they are accounted for under
SFAS No. 133 and their effect on the entity’s financial position, financial performance, and cash flows. The
provisions of SFAS No. 161 are effective as of the beginning of the 2009 fiscal year. The adoption of this
standard will not have a material impact on the consolidated financial statements.
In May 2008, the FASB issued Staff Position (“FSP”) Accounting Principles Board (“APB”) No.14-1
“Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 clarifies that convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB
Opinion No. 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants.”
Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability
and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal years. The Company will adopt
the provisions of FSP APB 14-1 on February 1, 2009 and will be required to retroactively apply its provisions.
The adoption of FSP APB 14-1 is expected to result in approximately $71.9 million of the carrying value of the
2.00% convertible senior notes to be reclassified to equity as of the March 2004 issuance date. This amount
represents the equity component of the proceeds from the notes calculated assuming a 6.25% non-convertible
borrowing rate. The discount will be accreted to interest expense over the 10 year period to the first put date of
the notes in 2014. Accordingly, beginning in fiscal year 2009, the Company will revise its consolidated
statements of income to reflect the pre-tax non-cash interest expense of approximately $6.4 million, $6.0 million,
$5.6 million, $5.4 million, and $4.4 million for 2008, 2007, 2006, 2005, and 2004, respectively.
In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”).
This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the
computation of both basic and diluted earnings per share. FSP EITF 03-6-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The
adoption of this standard will not have a material impact on the consolidated financial statements.
In December 2008, the FASB issued FSP FAS 132R-1, “Employers’ Disclosures about Postretirement
Benefit Plan Assets” (“FSP FAS 132R-1”), which provides additional guidance on employers’ disclosures about
the plan assets of defined benefit pension or other postretirement plans. The disclosures required by FSP
FAS 132R-1 include a description of how investment allocation decisions are made, major categories of plan
assets, valuation techniques used to measure the fair value of plan assets, the impact of measurements using
significant unobservable inputs and concentrations of risk within plan assets. The disclosures about plan assets
required by this FSP must be provided for fiscal years ending after December 15, 2009. For the Company, FSP
FAS 132R-1 will be effective for the fiscal year ending January 30, 2010 and will result in additional disclosures
related to the assets of defined benefit pension plans in notes to the Company’s consolidated financial statements.
RELATED PARTY TRANSACTIONS
See Item 13, Certain Relationships and Related Transactions, in this Form 10-K.
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