Sally Beauty Supply 2011 Annual Report Download - page 84

amendment is effective for interim periods and fiscal years beginning after December 15, 2011. Early
application by public companies is not permitted.
In June 2011, the FASB issued ASU No. 2011-05 which amended ASC Topic 220, Comprehensive Income.
This amendment, which must be applied retrospectively, will allow an entity the option to present the
components of net income, as well as total comprehensive income and the components of other
comprehensive income, either in a single continuous statement of comprehensive income or in two
separate consecutive statements. This amendment also eliminates the option to present the components of
other comprehensive income in the statement of stockholders’ equity but does not change the items that
must be reported. For public companies, this amendment is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2011. Early application is permitted.
In September 2011, the FASB issued ASU No. 2011-08 which amended ASC Topic 350, Intangibles-
Goodwill and Other. This amendment will allow an entity to first assess relevant qualitative factors in order
to determine whether it is necessary to perform the two-step quantitative goodwill impairment test under
ASC 350. In effect, the amendment eliminates the need to calculate the fair value of a reporting unit in
connection with the goodwill impairment test unless the entity determines, based on the qualitative
assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying
amount. This amendment is effective for annual and interim goodwill impairment tests performed in fiscal
years beginning after December 15, 2011. Early application is permitted.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational corporation, we are subject to certain market risks including foreign currency
fluctuations, interest rates and credit risk. We may consider a variety of practices in the ordinary course of
business to manage these market risks, including, when deemed appropriate, the use of derivative financial
instruments.
Foreign currency exchange rate risk
We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments
and earnings denominated in foreign currencies. Our primary exposures are to changes in exchange rates
for the U.S. dollar versus the Euro, the British pound sterling, the Canadian dollar, the Chilean peso, and
the Mexican peso. Our various foreign currency exposures at times offset each other, sometimes providing
a natural hedge against foreign currency risk. For the fiscal years 2011, 2010 and 2009, approximately 18%,
18% and 16%, respectively, of our consolidated net sales were made in currencies other than the U.S.
dollar. Consolidated net sales for the fiscal year ended September 30, 2011, are inclusive of approximately
$23.3 million in positive impact from changes in foreign currency exchange rates and other comprehensive
income reflects $8.0 million in foreign currency translation adjustments. For the fiscal years 2011, 2010 and
2009, fluctuations in the U.S. dollar exchange rates did not otherwise have a material effect on our
consolidated financial condition and consolidated results of operations.
A 10% increase or decrease in the exchange rates for the U.S. dollar versus the foreign currencies to which
we have exposure, would have impacted our consolidated net sales by approximately 1.8% in the fiscal year
2011, and would have impacted our consolidated net assets by approximately 2.5% at September 30, 2011.
The Company uses foreign currency options and collars, including, at September 30, 2011, collars with an
aggregate notional amount of $12.5 million to manage the exposure to the U.S. dollar resulting from our
Sinelco Group subsidiaries’ purchases of merchandise from third-party suppliers. Sinelco’s functional
currency is the Euro. The foreign currency collar agreements held by the Company at September 30, 2011
have contractual Euro to U.S. dollar exchange rates between 1.4000 and 1.4612 and expire in varying
amounts monthly through September 2012. In addition, the Company uses foreign currency forwards to
mitigate its exposure to changes in foreign currency exchange rates in connection with certain
intercompany balances not permanently invested. As such, at September 30, 2011, we held a foreign
currency forward which enabled us to sell approximately A19.9 million ($26.7 million, at the September 30,
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