Circuit City 2010 Annual Report Download - page 43

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 $0.9 million, $0.9 million and $0.7
million in 2010, 2009 and 2008, respectively.
Fair Value of Financial Instruments - Financial instruments consist primarily of investments in cash, trade accounts receivable debt and
accounts payable. 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, 2010 and 2009, the carrying amounts of cash, accounts receivable and accounts
payable are considered to be representative of their respective fair values due to their short-term nature. The Company’s debt is
considered to representative of its fair value because of its variable interest rate.
Concentration of Credit Risk —
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash,
and accounts receivable. The Company’s excess cash balances are invested with money center banks. 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
Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including the
Financial Accounting Standards Board (“FASB”) and the Securities and Exchange Commission (“SEC”). These authorities issue
numerous pronouncements, most of which are not applicable to the Company’s current or reasonably foreseeable operating structure.
Below are the new authoritative pronouncements that management believes are relevant to Company’s current operations.
In October 2009, the FASB issued revised guidance related to multiple-
element arrangements which requires an entity to allocate
arrangement consideration at the inception of an arrangement to all deliverables based on relative selling prices. This update eliminates
the use of the residual method of allocation and requires the relative-selling-
price method in all circumstances. This guidance is effective
for fiscal years beginning on or after September 15, 2010. Companies may use either prospective application for revenue arrangements
entered into, or materially modified, after the effective date or through retrospective application to all revenue arrangements for all periods
presented. The Company does not believe this amended guidance will have a material impact on its consolidated financial statements.
In October 2009, the FASB issued amended guidance that affects how entities account for revenue arrangements that contain both
hardware and software elements. Products that rely on software will be accounted for under the revised multiple-
element arrangement
revenue recognition guidance mentioned above rather than software revenue recognition guidance. The revised guidance must be adopted
no later than fiscal years beginning on or after September 15, 2010. The transition method and period for the adoption of this guidance
and the revisions to the multiple-
element arrangements guidance noted above must be the same. The Company does not believe that this
guidance will have a material impact on its consolidated financial statements.
39