Big Lots 2007 Annual Report Download - page 125

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Our leases generally obligate us for our applicable portion of real estate taxes, CAM, and property insurance
that has been incurred by the landlord with respect to the leased property. We maintain accruals for our
estimated applicable portion of real estate taxes, CAM, and property insurance incurred but not settled at each
reporting date. We estimate these accruals based on historical payments made and take into account any known
trends. Inherent in these estimates is the risk that actual costs incurred by landlords and the resulting payments
by us may be higher or lower than the amounts we have recorded on our books.
Certain of our leases provide for contingent rents that are not measurable at the lease inception date. Contingent
rent includes rent based on a percentage of sales that are in excess of a predetermined level. Contingent rent is
excluded from minimum rent and is included in the determination of total rent expense when it is probable that
the expense has been incurred and the amount is reasonably estimable.
Recent Accounting Pronouncements
In July 2006, the FASB issued FIN No. 48. FIN No. 48 is an interpretation of SFAS No. 109, and clarifies
the accounting for uncertainty in income tax positions. FIN No. 48 requires us to recognize in our financial
statements the impact of an income tax position, if that position is more likely than not of being sustained, based
on the technical merits of the position. The recognition and measurement guidelines of FIN No. 48 were applied
to all of our income tax positions as of the beginning of 2007, resulting in an increase in our tax liabilities of
$2.2 million with a corresponding decrease to beginning retained earnings for the cumulative effect of a change
in accounting principle.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 addresses how
companies should approach measuring fair value when required by GAAP. SFAS No. 157 does not create or
modify any GAAP requirements to apply fair value accounting. The standard provides a single definition
of fair value that is to be applied consistently for all accounting applications and also generally describes
and prioritizes according to reliability the methods and inputs used in valuations. SFAS No. 157 prescribes
additional disclosures regarding the extent of fair value measurements included in a company’s financial
statements and the methods and inputs used to arrive at these values. SFAS No. 157 is effective on a prospective
basis for us in the first quarter of 2008. In February 2008, the FASB deferred the required application of SFAS
No. 157 to non-financial assets until the beginning of fiscal 2009. We expect no significant impact on our
financial condition, results of operations, or liquidity from adopting this statement.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other
items at fair value. SFAS No. 159 will be effective at the beginning of 2008. We expect no significant impact on
our financial condition, results of operations, or liquidity from adopting this statement.
In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1, Definition of Settlement in FASB
Interpretation No. 48. FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively
settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 was effective
retroactively to February 4, 2007. The implementation of this standard did not have a material impact on our
financial condition, results of operations, or liquidity.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which changes the accounting
for business combinations and their effects on the financial statements. SFAS No. 141(R) will be effective at
the beginning of fiscal 2009. The adoption of this statement is not expected to have a material impact on our
financial condition, results of operations, or liquidity.
In December 2007, the FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, and amendment of ARB No. 51. SFAS No. 160 requires entities to report
non-controlling interests in subsidiaries as equity in their consolidated financial statements. SFAS No. 160 will
be effective at the beginning of fiscal 2009. The adoption of this statement is not expected to have a material
impact on our financial condition, results of operations, or liquidity.