Aarons 2005 Annual Report Download - page 26

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
In November 2004, the FASB issued Statement of Financial
Accounting Standards No. 151, Inventory Costs — An
Amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151
amends ARB 43, Chapter 4, to clarify that abnormal amounts
of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period
charges. In addition, this Statement requires that allocation of
fixed production overheads to the costs of conversion be based
on the normal capacity of the production facilities. SFAS 151
is effective for the Company beginning January 1, 2006.
Management is currently assessing the impact of SFAS 151,
but does not expect the impact to be material.
In December 2004, the FASB issued Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-based
Payment (SFAS 123R). SFAS 123R amends SFAS 123 to
require adoption of the fair value method of accounting for
employee stock options effective June 30, 2005. The transition
guidance in SFAS 123R specifies that compensation expense
for options granted prior to the effective date be recognized
over the remaining vesting period of those options, and that
compensation expense for options granted subsequent to the
effective date be recognized over the vesting period of those
options. Management is currently assessing the impact of SFAS
No. 123R, but does not expect the impact to be material.
In May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections — a replacement of APB
Opinion No. 20 and FASB Statement No. 3.SFAS 154 replaces
APB Opinion No. 20, Accounting Changes and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS 154 applies
to all voluntarychanges in an accounting principle. It also
applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not
include specific transition provisions. SFAS 154 is effective for
accounting changes and error corrections occurring in fiscal
years beginning after December 15, 2005. The adoption of
SFAS 154 is not anticipated to have a material effect on the
Company’sfinancial position or results of operations.
In March 2005, the FASB issued Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations
(FIN 47). FIN 47 clarifies that the term “conditional asset
retirement obligation” as used in SFAS No. 143, Accounting
for Asset Retirement Obligations,refers to a legal obligation
to perform an asset retirement activity in which the timing and
method of settlement are conditional on a future event that
may or may not be within the control of the entity. FIN 47
is effective no later than the end of fiscal years ending after
December 15, 2005. The Company’s leases contain asset
retirement obligations related to the removal of signage at
the termination of these leases. The Company adopted
FIN 47 for the year ended December 31, 2005. The impact
of adoption was not material.
Forward-Looking Statements
Certain written and oral statements made by our Company
may constitute “forward-looking statements” as defined under
the Private Securities Litigation Reform Act of 1995, including
statements made in this report and in the Company’s filings
with the Securities and Exchange Commission. All statements
which address operating performance, events, or developments
that we expect or anticipate will occur in the future — including
growth in store openings, franchises awarded, and market
share, and statements expressing general optimism about
futureoperating results — are forward-looking statements.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially.
The Company undertakes no obligation to publicly update or
revise any forward-looking statements. For a discussion of such
risks and uncertainties, see “Risk Factors” in Item 1A of the
Company’sAnnual Reporton Form10-K filed with the
Securities and Exchange Commission.