Shutterfly 2008 Annual Report Download - page 42

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Recent Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS 157”).
FAS 157 defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. In February 2008, the FASB issued a staff position that delays the effective date of SFAS 157 for all nonfinancial assets and
liabilities except for those recognized or disclosed at least annually. Except for the delay for nonfinancial assets and liabilities, SFAS 157 is effective for fiscal years beginning after
November 15, 2007 and interim periods within such years. The Company does not expect the adoption of FAS 157 will have a material effect on its financial position and results of
operations.
In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”)
which permits entities to choose to measure
many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 was effective for the Company on January 1, 2008.
The Company does not expect the adoption of FAS 159 will have a material effect on its financial position and results of operations.
In December 2007, the FASB issued FAS No. 141R, “Business Combinations” (“FAS 141R”)
which replaces FAS No. 141 and establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. FAS
141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption of FAS 141R is prohibited. The Company is currently
evaluating the impact, if any, of adopting FAS 141R on its financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS 160”)
which amends ARB 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. In addition to the amendments to ARB 51, this Statement amends
FASB Statement No. 128, Earnings per Share; so that earnings-per-
share data will continue to be calculated the same way those data were calculated before this Statement was issued.
This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is currently evaluating the impact, if
any, of adopting FAS 160 on its financial position and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate and Credit Risk.
We have exposure to interest rate risk that relates primarily to our investment portfolio. All of our current investments are classified as cash
equivalents and short-
term investments and carried at cost, which approximates market value. We do not currently use or plan to use derivative financial instruments in our investment
portfolio. The risk associated with fluctuating interest rates is limited to our investment portfolio and we do not believe that a 10% change in interest rates will have a significant impact
on our interest income, operating results or liquidity.
As of December 31, 2007, our cash and cash equivalents were maintained by financial institutions in the United States and our deposits may be in excess of insured limits. We
believe that the financial institutions that hold our investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.
Inflation.
We do not believe that inflation has had a material effect on our current business, financial condition or results of operations. If our costs were to become subject to
significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial
condition and results of operations.
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