Supercuts 2010 Annual Report Download - page 100

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
that must be considered when allocating arrangement consideration. The new guidance also requires entities to allocate arrangement
consideration to the separate units of accounting based on the deliverables' relative selling price. The provisions will be effective for revenue
arrangements entered into or materially modified in the Company's fiscal year 2011 and must be applied prospectively. The adoption of the
new guidance on July 1, 2010, for multiple-deliverable revenue arrangements, will not have a material effect on the Company's financial
position, results of operations, and cash flows.
Amendments to Accounting for Variable Interest Entities
In June 2009, the FASB issued guidance on the accounting for variable interest entities. The guidance amends previous variable interest
entity guidance to require an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give it a
controlling financial interest in a variable interest entity. Additionally, an enterprise is required to assess whether it has an implicit financial
responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of
the variable interest entity that most significantly impact the entity's economic performance. This guidance requires enhanced disclosures that
will provide users of financial statements with more transparent information about an enterprise's involvement in a variable interest entity. It
would also require ongoing assessments to determine whether an entity is a variable interest entity and whether an enterprise is the primary
beneficiary of a variable interest entity. The guidance is effective for the Company's fiscal year 2011. The adoption of the new guidance on
July 1, 2010, for variable interest entities, will not have a material effect on the Company's financial position, results of operations, and cash
flows.
2. DISCONTINUED OPERATIONS
On February 16, 2009, the Company sold its Trade Secret salon concept (Trade Secret). The Company concluded, after a comprehensive
review of strategic and financial options, to divest Trade Secret. The sale of Trade Secret included 655 company-
owned salons and 57 franchise
salons, all of which had historically been reported within the Company's North America reportable segment. The sale of Trade Secret included
CCI. CCI owned and operated PureBeauty and BeautyFirst salons which were acquired by the Company on February 20, 2008.
The Company concluded that Trade Secret qualified as held for sale as of December 31, 2008, under accounting for the impairment or
disposal of long-lived asset guidance, and is presented as discontinued operations in the Consolidated Statements of Operations for all periods
presented. The operations and cash flows of Trade Secret have been eliminated from ongoing operations of the Company and there will be no
significant continuing involvement in the operations after disposal pursuant to guidance in determining whether to report discontinued
operations. The agreement included a provision that the Company would supply product to the buyer of Trade Secret and provide certain
administrative services for a transition period. Under this agreement, the Company recognized $20.0 and $32.2 million of product revenues on
the supply of product sold to the purchaser of Trade Secret and $1.9 and $2.9 million of other income related to the administrative services
during the years ended June 30, 2010 and 2009, respectively.
The agreement was substantially complete as of September 30, 2009. Beginning within the second quarter of fiscal year 2010, the
Company has an agreement in which the Company provides warehouse services to the purchaser of Trade Secret. Under the warehouse
services agreement, the Company
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