Staples 2007 Annual Report Download - page 118

Download and view the complete annual report

Please find page 118 of the 2007 Staples 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 142

  • 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
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
NOTE A Summary of Significant Accounting Policies (Continued)
The Company adopted FIN 48 as of February 4, 2007, the first day of the 2007 fiscal year. The adoption of FIN 48
did not result in any material adjustments to the Company’s reserves for uncertain tax positions. At the beginning of
fiscal 2007, the Company had $81.8 million of gross unrecognized tax benefits, $65.9 million of which, if recognized,
would affect the Company’s tax rate. At February 2, 2008, the Company had $87.7 million of gross unrecognized tax
benefits, $66.1 million of which, if recognized, would affect the Company’s tax rate. The Company does not reasonably
expect any material changes to the estimated amount of liability associated with its uncertain tax positions through fiscal
2008. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of February 4, 2007 .......................................... $81,848
Additions for tax positions related to fiscal year 2007 .......................... 22,460
Additions for tax positions of prior years ................................... 8,932
Reductions for tax positions of prior years .................................. (18,430)
Settlements ........................................................ (7,122)
Balance as of February 2, 2008 .......................................... $87,688
Staples is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The
Company has substantially concluded all U.S. federal income tax matters for years through 2005 and all material state,
local and foreign income tax matters for years through 2000.
Staples’ continuing practice is to recognize interest and penalties related to income tax matters in income tax
expense. The Company had $11.1 million accrued for interest and penalties as of February 2, 2008.
New Accounting Pronouncements: In September 2006, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 157, ‘‘Fair Value Measurements’’ (‘‘SFAS No. 157’’). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The adoption of SFAS No. 157 is not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.
In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities’’ (‘‘SFAS No. 159’’). SFAS No. 159 allows
companies to measure many financial assets and liabilities at fair value. It also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The adoption of SFAS No. 159 is not expected to
have a material impact on the Company’s financial position, results of operations or cash flows.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 141(R), ‘‘Business Combinations’’ (‘‘SFAS No. 141(R)’’). SFAS No. 141(R) replaces SFAS No. 141, ‘‘Business
Combinations’’, but retains the requirement that the purchase method of accounting for acquisitions be used for all
business combinations. SFAS No. 141(R) expands on the disclosures previously required by SFAS No. 141, better defines
the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring
the assets acquired (including goodwill), the liabilities assumed and any noncontrolling interests in the acquired business.
SFAS No. 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation
allowances or uncertain tax positions related to acquired businesses. SFAS No. 141(R) is effective for all business
combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not
permitted. The Company will adopt this statement as of February 1, 2009. Management is currently evaluating the
impact SFAS No. 141(R) will have on the Company’s consolidated financial statements.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 160, ‘‘Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51’’ (‘‘SFAS
No. 160’’). SFAS No. 160 requires that noncontrolling (or minority) interests in subsidiaries be reported in the equity
section of the company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and
C-10