Sears 2007 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2007 Sears annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 110

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110

requirements for an employer’s accounting for defined benefit pension and other postretirement plans. The
recognition and disclosure provisions require an employer to (1) recognize the funded status of a benefit plan—
measured as the difference between plan assets at fair value and the benefit obligation—in its statement of
financial position, (2) recognize as a component of other comprehensive income (OCI), net of tax, the gains or
losses and prior service costs or credits that arise during the period but are not recognized as components of net
periodic benefit cost, and (3) disclose in the notes to financial statements certain additional information. SFAS
No. 158 does not change the amounts recognized in the income statement as net periodic benefit cost. As
required by SFAS No. 158, we adopted the recognition and disclosure provisions of the Statement as of
February 3, 2007, and accordingly recognized the funded status of our defined benefit pension and other
postretirement plans and provided the required additional disclosures. The adoption of these provisions of SFAS
No. 158 did not have any material impact on our consolidated results of operations or cash flows. See Note 10 for
further information regarding the impact of adopting SFAS 158.
As required under the Statement, we will adopt the measurement-date requirements of SFAS No. 158
effective fiscal 2008. Under the measurement-date requirements, an employer is required to measure defined
benefit plan assets and obligations as of the date of the employer’s fiscal year end. We currently measure our
plan assets and obligations as of December 31. We will adopt the change in measurement date by re-measuring
plan assets and benefit obligations as of our fiscal year end in fiscal 2008, pursuant to the transition requirements
of SFAS No. 158. We are currently evaluating the impact, if any, the adoption of the measurement-date
requirements of SFAS No. 158 will have on our financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities.” SFAS No. 159 gives companies the option of applying at specified election dates fair value
accounting to certain financial instruments and other items that are not currently required to be measured at fair
value. If a company chooses to record eligible items at fair value, the company must report unrealized gains and
losses on those items in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. Although we continue to evaluate the impact the adoption of SFAS No. 159
will have on our financial statements, we do not currently believe adoption will have a material impact on our
financial condition or operating results.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin (“ARB”) No. 51.” SFAS No. 160 is effective for
fiscal years beginning on or after December 15, 2008, with early adoption prohibited. Before SFAS No. 160 was
issued, limited guidance existed for reporting noncontrolling interests and many companies reported such interest
as a liability in its balance sheet under the heading “Minority Interest.” SFAS No. 160 requires companies to
report noncontrolling interests of consolidated subsidiaries as a component of equity in the consolidated
statement of financial position. As a result, upon adoption of this Statement, Holdings will reclassify its
noncontrolling interest in Sears Canada and OSH (which represents 30% and 19.9% of the subsidiaries’
ownership, respectively) from its current classification within the long-term liabilities section of Holdings’
consolidated balance sheet to classification within the shareholders’ equity section. See Note 18 for the amount
of Holdings’ noncontrolling interest in Sears Canada and OSH (reported as Minority Interest) at February 2, 2008
and February 3, 2007.
In June 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with SFAS No. 109. This Interpretation
prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and
transition. We adopted the provisions of FIN 48 effective February 4, 2007. The impact upon adoption was to
decrease our beginning retained earnings by approximately $6 million. See Note 14 for further information
regarding the impact of adopting FIN 48.
50