Coach 2010 Annual Report Download - page 40

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TABLE OF CONTENTS
Share-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options,
based on the grant-date fair value of those awards. The grant-date fair value of stock option awards is determined using the Black-Scholes
option pricing model and involves several assumptions, including the expected term of the option, expected volatility and dividend yield.
The expected term of options represents the period of time that the options granted are expected to be outstanding and is based on historical
experience. Expected volatility is based on historical volatility of the Company’s stock as well as the implied volatility from publicly traded
options on Coach’s stock. Dividend yield is based on the current expected annual dividend per share and the Company’s stock price.
Changes in the assumptions used to determine the Black-Scholes value could result in significant changes in the Black-Scholes value.
However, a 10% change in the Black-Scholes value would result in an insignificant change in fiscal 2011 share-based compensation
expense.
Recent Accounting Pronouncements
Accounting Standards Codification 820-10 “ Fair Value Measurements and Disclosures,” (“ASC 820-10”) was amended in January
2010 to require additional disclosures related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of
transfers of assets and liabilities between Levels 1 and 2 of the fair value hierarchy, including the reasons and the timing of the transfers,
and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of the assets and liabilities measured
under Level 3 of the fair value hierarchy. The guidance was effective for the Company beginning on December 27, 2009, except for certain
disclosures about purchases, sales, issuances, and settlements related to Level 3 fair value measurements, which were effective for the
Company beginning on January 2, 2011. The disclosure guidance adopted on December 27, 2009 and January 2, 2011 did not have a
material impact on our consolidated financial statements.
In May 2011, ASC 820-10 was further amended to clarify certain disclosure requirements and improve consistency with international
reporting standards. This amendment is to be applied prospectively and is effective for the Company beginning January 1, 2012. The
Company does not expect its adoption to have a material effect on its consolidated financial statements.
Accounting Standards Codification Topic 220, “Comprehensive Income,” was amended in June 2011 to require entities to present the
total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The amendment does not change the items that
must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income under
current GAAP. This guidance is effective for the Company’s fiscal year and interim periods beginning July 1, 2012. The Company is
currently evaluating this guidance, but does not expect its adoption to have a material effect on its consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from
adverse changes in interest rates or foreign currency exchange rates. Coach manages these exposures through operating and financing
activities and, when appropriate, through the use of derivative financial instruments with respect to Coach Japan and Coach Canada. The
use of derivative financial instruments is in accordance with Coach’s risk management policies. Coach does not enter into derivative
transactions for speculative or trading purposes.
The following quantitative disclosures are based on quoted market prices obtained through independent pricing sources for the same or
similar types of financial instruments, taking into consideration the underlying terms and maturities and theoretical pricing models. These
quantitative disclosures do not represent the maximum possible loss or any expected loss that may occur, since actual results may differ
from those estimates.
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