Aarons 2007 Annual Report Download - page 30

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Purchase orders or contracts for the purchase of rental
merchandise and other goods and services are not included
in the table above. We are not able to determine the aggre-
gate amount of such purchase orders that represent
contractual obligations, as purchase orders may represent
authorizations to purchase rather than binding agreements.
Our purchase orders are based on our current distribution
needs and are fulfilled by our vendors within short time
horizons. We do not have significant agreements for the
purchase of rental merchandise or other goods specifying
minimum quantities or set prices that exceed our expected
requirements for three months.
MARKET RISK
From time-to-time, we manage our exposure to changes in
short-term interest rates, particularly to reduce the impact on
floating-rate borrowings, by entering into interest rate swap
agreements. These swap agreements involve the receipt of
amounts by us when floating rates exceed the fixed rates
and the payment of amounts by us to the counterparties
when fixed rates exceed the floating rates in the agreements
over their term. We accrue the differential we may pay
or receive as interest rates change and recognize it as an
adjustment to the floating rate interest expense related to
our debt. The counterparties to these contracts are high
credit quality commercial banks, which we believe largely
minimize the risk of counterparty default.
At December 31, 2007 and 2006 we did not have any
swap agreements.
We do not use any market risk sensitive instruments to
hedge commodity, foreign currency, or risks other than inter-
est rate risk, and hold no market risk sensitive instruments
for trading or speculative purposes.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 establishes a frame-
work for measuring the fair value of assets and liabilities
which is intended to provide increased consistency in how
fair value determinations are made under various existing
accounting standards which permit, or in some cases require,
estimates of fair value market value. SFAS 157 also expands
financial statement disclosure requirements about the use
of fair value measurements, including the effect of such
measures on earnings. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November
15, 2007, and interim periods within those years. However,
on December 14, 2007, the FASB issued FASB Staff Position
FAS 157-b, which deferred the effective date of SFAS 157 for
one year, as it relates to nonfinancial assets and liabilities.
We will adopt SFAS 157 as it relates to financial assets and
liabilities beginning in the first quarter of fiscal 2008. We
are currently evaluating the impact of this Statement on our
financial statements.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities — Including an Amendment of SFAS No. 115 (“SFAS
159”). SFAS 159 permits an entity to choose to measure
many financial instruments and certain other items at fair
value. SFAS 159 is effective for financial statements issued
for fiscal years beginning after November 15, 2007. We are
currently evaluating the impact of this Statement on our
financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised
2007), “Business Combinations” (“SFAS 141R”). Under SFAS
141R, an acquiring entity will be required to recognize all the
assets acquired and liabilities assumed in a transaction at the
acquisition-date fair value with limited exceptions. SFAS 141R
will change the accounting treatment for certain specific
acquisition related items including: expensing acquisition
related costs as incurred, valuing noncontrolling interests at
fair value at the acquisition date and expensing restructuring
costs associated with an acquired business. SFAS 141R also
includes a substantial number of new disclosure require-
ments. SFAS 141R is to be applied prospectively to business
combinations for which the acquisition date is on or after
January 1, 2009. We are currently evaluating the impact of
this Statement on our financial statements.