Stein Mart 2015 Annual Report Download - page 33

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-9
Impairment of Long-Lived Assets. We follow the guidance in ASC Topic 360, Property, Plant and Equipment, which requires
impairment losses to be recorded on long-lived assets used in operations whenever events or changes in circumstances indicate that the
net carrying amounts may not be recoverable. For long-lived assets held for use, an impairment loss is recognized if the sum of the future
undiscounted cash flows from the use of the assets is less than the carrying value of the assets. The amount of the impairment is the
excess of the carrying value of the asset over its fair value. Impairment reviews are performed for individual stores during the fourth
quarter, or more frequently should circumstances change. Factors used in the review include management’s plans for future operations,
recent operating results and projected cash flows. See Note 2 for further discussion.
Fair Value Measurements. We follow the guidance of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair
value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance also
establishes the following three-level hierarchy based upon the transparency of inputs to the valuation of an asset or liability on the
measurement date:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly.
Level 3: Unobservable inputs that reflect assumptions about what market participants would use in pricing assets or liabilities based
on the best information available.
Assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents. Assets and liabilities measured on a
non-recurring basis include store related assets as used in our impairment calculations. See Note 2 for further discussion.
As the Company’s primary debt obligations are variable rate, there are no significant differences between the estimated fair value (Level 2
measurements) and the carrying value of the Company’s debt obligations at January 30, 2016. The Company did not have outstanding
debt at January 31, 2015.
Store Closing Costs. We follow the guidance in ASC Topic 420, Exit or Disposal Cost Obligations, to record store closing costs. ASC
Topic 420 requires the recognition of costs associated with exit or disposal activities when they are incurred, generally the cease-use date.
Lease termination costs are recorded net of estimated sublease income that could reasonably be obtained for the properties.
Accounts Payable. Accounts payable represents amounts owed to third parties at the end of the period. Accounts payable includes book
cash overdrafts in excess of cash balances in such accounts of approximately $7.5 million and $26.0 million at January 30, 2016 and
January 31, 2015, respectively. The Company includes the change in book cash overdrafts in operating cash flows.
Insurance Reserves. We use a combination of insurance and self-insurance for various risks including workers’ compensation, general
liability and associate-related health care benefits, a portion of which is paid by the covered employees. We are responsible for paying the
claims that are less than the insured limits. The reserves recorded for these claims are estimated actuarially, based on claims filed and
claims incurred but not reported. These reserve estimates are adjusted based upon actual claims filed and settled.
Store Pre-Opening Costs. Costs incurred prior to the date that new stores open are expensed as incurred. These include payroll for
store set-up, advertising and pre-opening rent.
Comprehensive Income. Comprehensive income consists of two components, net income and other comprehensive income. Other
comprehensive income refers to gains and losses that, under generally accepted accounting principles, are recorded as an element of
shareholders’ equity but are excluded from net income. Accumulated other comprehensive loss in 2015 and 2014, includes changes in
postretirement benefits. See Note 7 for further discussion.
Revenue Recognition. Revenue from sales of our merchandise is recognized at the time of sale, net of any returns, discounts and
percentage-off coupons. The Company’s e-commerce operation records revenue at the estimated customer receipt date. Shipping and
handling fees charged to customers are also included in total net sales with corresponding costs recorded as cost of goods sold. Future
merchandise returns are estimated based on historical experience. Sales tax collected from customers is not recognized as revenue and
is included in Accrued expenses and other current liabilities until paid. Shoe department inventory is owned by a single supplier under a
supply agreement. Our percentage of net revenue per the supply agreement is included in Net sales in the Consolidated Statements of
Income.