Sally Beauty Supply 2011 Annual Report Download - page 113

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2011, 2010 and 2009
expected to apply to taxable income in the years in which temporary differences are estimated to be
recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated
statements of earnings in the period of enactment. A valuation allowance is recorded to reduce the
carrying amounts of deferred tax assets to the amount expected to be realized unless it is
more-likely-than-not that such assets will be realized in full. The estimated tax benefit of an uncertain tax
position is recorded in our financial statements only after determining a more-likely-than-not probability
that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.
Foreign Currency
The functional currency of each of the Company’s foreign operations is generally the respective local
currency. Balance sheet accounts are translated into U.S. dollars (the Company’s reporting currency) at
the rates of exchange in effect at the balance sheet date, while the results of operations are translated using
the average exchange rates during the period presented. The resulting translation adjustments are
recorded as a component of accumulated other comprehensive income in our consolidated balance sheets.
Foreign currency transaction gains or losses are included in our consolidated statements of earnings when
incurred and were not significant in any of the periods presented in the accompanying financial statements.
Share-Based Compensation
Prior to November 2006, the Company was a subsidiary of Alberto-Culver and had no share-based
compensation plans of its own, however, Alberto-Culver had granted to Company employees certain stock
options with a cash settlement provision contingent upon the occurrence of certain change in control
events, pursuant to its stock option plans. As such, the contingent cash settlement of these stock options as
a result of such events would not be solely in the control of the Company. Accordingly, as of September 30,
2010, the Company reported $0.9 million in ‘‘Stock options subject to redemption’’ outside of accumulated
stockholders’ equity (deficit) on its consolidated balance sheets and this amount was reclassified back into
additional paid-in capital as the related stock options were exercised or canceled or otherwise terminated.
3. Comprehensive Income and Accumulated Other Comprehensive (Loss) Income
Comprehensive Income
Comprehensive income reflects changes in accumulated stockholders’ equity (deficit) from sources other
than transactions with stockholders and, as such, includes net earnings and certain other specified
components. The Company’s only components of comprehensive income, other than net earnings, are
foreign currency translation adjustments and deferred gains (losses) on certain interest rate swap
agreements, net of income tax.
F-13