Circuit City 2008 Annual Report Download - page 49

Table of Contents
in 2008, 2007 and 2006, respectively were included for the diluted calculation. The weighted average number of stock options outstanding
excluded from the computation of diluted earnings per share was 622,000, 0, and 36,000 in 2008, 2007 and 2006, respectively due to their
antidilutive effect.
Comprehensive Income — Comprehensive income consists of net income and foreign currency translation adjustments and is included in
the Consolidated Statements of Shareholders’ Equity. Comprehensive income was $34,214,000, $74,011,000 and $51,435,000 in 2008,
2007 and 2006, respectively.
Employee Benefit Plans - The Company’s U.S. subsidiaries participate in a defined contribution 401(k) plan covering substantially all U.S.
employees. Employees may invest 1% or more of their eligible compensation, limited to maximum amounts as determined by the Internal
Revenue Service. The Company provides a matching contribution to the plan, determined as a percentage of the employees’ contributions.
Aggregate expense to the Company for contributions to such plans was approximately $730,000, $614,000 and $514,000 in 2008, 2007 and
2006, respectively.
Fair Value of Financial Instruments - Financial instruments consist primarily of investments in cash and cash equivalents, trade accounts
receivable, accounts payable and debt obligations. The Company estimates the fair value of financial instruments based on interest rates
available to the Company and by comparison to quoted market prices. At December 31, 2008 and 2007, the carrying amounts of cash and
cash equivalents, accounts receivable, income taxes receivable and payable and accounts payable are considered to be representative of their
respective fair values due to their short-term nature.
Concentration of Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash,
cash equivalents and accounts receivable. The Company’s excess cash balances are invested with money center banks such as Wachovia
and JP Morgan Chase. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers
and their geographic dispersion comprising the Company’s customer base. The Company also performs on-going credit evaluations and
maintains allowances for potential losses as warranted.
Recent 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 to the requisite service having been rendered. The guidance in this FSP applies to the calculation of Earnings
Per Share (“EPS”) under Statement 128 for share-based payment awards with rights to dividends or dividend equivalents. Unvested share-
based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of EPS pursuant to the two-class method. This FSP is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall
be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the
provisions of this FSP. The Company does not expect the adoption of this FSP to have a material impact on its consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” which replaces FASB Statement 141. SFAS No.141R
retains the requirement that the acquisition method of accounting be used for business combinations. The objective of SFAS No. 141R is to
improve the relevance, representational faithfulness and comparability that reporting entities provide in their financial reports about business
combinations and their effects. SFAS No. 141R establishes principles and requirements for how an acquirer 1) recognizes and measures
identifiable assets acquired, the liabilities assumed and any non-
controlling interest in the acquiree, 2) recognizes and measures the goodwill
acquired in the combination or a gain from a bargain purchase and 3) determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for
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