Circuit City 2008 Annual Report Download - page 25

Table of Contents
examination from domestic and foreign tax authorities regarding the amount of taxes due. These examinations include questions regarding the
timing and amount of deductions and the allocation of income among various tax jurisdictions. We have established, and periodically reevaluate,
an estimated income tax reserve on our consolidated balance sheet to provide for the possibility of adverse outcomes in income tax proceedings.
While management believes that we have identified all reasonably identifiable exposures and that the reserve we have established for identifiable
exposures is appropriate under the circumstances, it is possible that additional exposures exist and that exposures may be settled at amounts
different than the amounts reserved.
We recognize deferred tax assets and liabilities for the effect of temporary differences between the book and tax bases of recorded assets and
liabilities and for tax loss carry forwards. The realization of net deferred tax assets is dependent upon our ability to generate sufficient future
taxable income. Where it is more likely than not that some portion or all of the deferred tax asset will not be realized, we have provided a
valuation allowance. If the realization of those deferred tax assets in the future is considered more likely than not, an adjustment to the deferred
tax assets would increase net income in the period such determination is made. In the event that actual results differ from these estimates or we
adjust these estimates in future periods, an adjustment to the valuation allowance may be required, which could materially affect our
consolidated financial position and results of operations.
Restructuring charges.
We have taken restructuring actions in the past and could in the future commence further restructuring activities which
result in recognition of restructuring charges if events make it necessary. These actions require management to make judgments and utilize
significant estimates regarding the nature, timing and amounts of costs associated with the activity. When we incur a liability related to a
restructuring action, we estimate and record all appropriate expenses, including expenses for severance and other employee separation costs,
facility consolidation costs (including estimates of sublease income), lease cancellations, asset impairments and any other exit costs. Should the
actual amounts differ from our estimates, the amount of the restructuring charges could be impacted, which could materially affect our
consolidated financial position and results of operations.
Recently Adopted and Newly Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)
No. 157
“Fair Value Measurements”. This statement was issued to increase consistency and comparability in fair value measurements and for
expanded disclosures about fair value measurements. Effective January 1, 2008 the Company adopted the provisions of SFAS No. 157, which
did not have a material impact on the Company’s consolidated financial statements.
In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-2, which provides for a one-year deferral of the provisions of SFAS
No.
157 until fiscal years beginning after December 15, 2008 for non-financial assets and liabilities that are recognized or disclosed at fair
value in the consolidated financial statements on a non-
recurring basis. The Company is currently evaluating the potential impact, if any, of FSP
157-2.
In April 2008, the FASB issued FSP FAS 142-3 “Determination of the Useful Life of Intangible Assets”. FSP FAS 142-
3 amends the factors that
should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under
FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a
recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. The standard applies prospectively
to intangible assets acquired and/or recognized on or after January 1, 2009. The Company is currently evaluating the impact, if any, the adoption
of this FSP may have on the Company’s consolidated financial statements.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities”. This FSP was issued to clarify that instruments granted in share-based payment transactions can be
participating securities prior
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