Coach 2002 Annual Report Download - page 34

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Table of Contents
through license agreements with manufacturers of other consumer products that incorporate the Coach brand. Revenue earned under these
contracts is recognized based upon reported sales from the licensee.
New Accounting Standards
On December 31, 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based
Compensation — Transition and Disclosure”, which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148
provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. The Company does not expense stock options; therefore the adoption of this statement will not have any impact on Coach’s
consolidated financial position or results of operations. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require more prominent and more frequent disclosures in financial statements of the effects of stock-based compensation. See Note 1 of the
Consolidated Financial Statements for these expanded disclosures.
In November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN No. 45 elaborates on the existing disclosure requirements for
most guarantees, including loan guarantees such as standby letters of credit and product warranties. It also clarifies that at the time a
company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligation it assumes
under the guarantee and must disclose that information in its interim and annual financial statements. The provisions related to recognizing
a liability at inception of the guarantee for the fair value of the guarantor’s obligations do not apply to guarantees accounted for as derivatives.
The initial recognition and measurements provisions were effective for interim or annual periods ending after December 31, 2002 (see
Note 7 of the Consolidated Financial Statements). The adoption of this statement did not have a material impact on Coach’s consolidated
financial position or results of operations.
In January 2003, the FASB issued FIN No. 46, “Consolidations of Variable Interest Entities”. This interpretation requires a company to
consolidate variable interest entities (“VIE”) if the enterprise is a primary beneficiary (holds a majority of the variable interest) of the VIE and
the VIE possesses specific characteristics. It also requires additional disclosure for parties involved with VIEs. The provisions of FIN No. 46
are effective for fiscal 2003. Since the Company does not have any unconsolidated VIEs, the adoption of FIN No. 46 did not have an impact
on its financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” to
amend and clarify financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under
SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 requires that contracts with comparable
characteristics be accounted for similarly and clarifies under what circumstances a contract with an initial net investment meets the
characteristics of a derivative as discussed in SFAS No. 133. In addition, it clarifies when a derivative contains a financing component that
warrants special reporting in the statement of cash flows. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003
and for hedging relationships designated after June 30, 2003. The Company believes that the adoption of SFAS No. 149 will not have an
impact on its financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some
circumstances). The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company believes that the adoption of
SFAS No. 150 will not have an impact on its financial position or results of operations.
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