Saks Fifth Avenue 2008 Annual Report Download - page 69

SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
the notes in its calculation of diluted earnings per share. If and when the FASB amends SFAS No. 128, the effect
of the changes would require the Company to use the if-converted method in calculating diluted earnings per
share except when the effect would be anti-dilutive. The effect of adopting the amendment to SFAS No. 128 as
of January 31, 2009 would not change the diluted share count as the effect would be anti-dilutive due to the loss
from continuing operations for the year.
PENSION PLANS
Pension expense is based on actuarial models used to estimate the total benefits ultimately payable to
participants and is allocated to the respective service periods. The Company’s funding policy provides that
contributions to the pension trusts shall be at least equal to the minimum funding requirement of the Employee
Retirement Income Security Act of 1974. The Company may provide additional contributions from time to time,
generally not to exceed the maximum tax-deductible limitation.
Beginning in fiscal 2008, the Company’s pension plans are valued annually as of the fiscal year-end balance
sheet date in accordance with SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans.” (“SFAS No. 158”). In prior years, the pension plans were valued annually on
November 1st. The projected unit credit method is utilized in recognizing the Company’s pension liabilities.
GIFT CARDS
The Company sells gift cards with no expiration dates. At the time gift cards are sold, no revenue is
recognized; rather a liability is established for the value of the card. The liability is relieved and revenue is
recognized when the gift cards are redeemed by the customer for merchandise. The liability for unredeemed gift
cards aggregated $33,315 and $33,844 at January 31, 2009, and February 2, 2008, respectively.
Outstanding gift cards may be subject to state escheatment laws. The Company periodically evaluates
unredeemed gift cards and if a determination is made that it is remote that the gift card will be redeemed and if it
is determined that the gift card is not subject to escheatment, then the Company will reverse the unredeemed
liability. The total reversal reflected in net sales for the years ended January 31, 2009 and February 2, 2008 was
$5,397 and $11,701, respectively. There was no such reversal for gift card breakage reflected in net sales in fiscal
2006.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between the financial reporting and tax
bases 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.
SEGMENT REPORTING
The Company derives all of its revenue from the sale of luxury merchandise. Accordingly, the Company has
identified the operation of its retail stores and e-commerce business as the Company’s one reportable segment.
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