CompUSA 2010 Annual Report Download - page 76

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The translation of the financial statements of our operations located outside of the United States is impacted by movements in foreign
currency exchange rates. Changes in currency exchange rates as measured against the U.S. dollar may positively or negatively affect
income statement, balance sheet and cash flows as expressed in U.S. dollars. Sales would have fluctuated by approximately $123.2
million and pretax income would have fluctuated by approximately $2.1 million if average foreign exchange rates changed by 10% in
2010. We have limited involvement with derivative financial instruments and do not use them for trading purposes. We may enter into
foreign currency options or forward exchange contracts aimed at limiting in part the impact of certain currency fluctuations, but as of
December 31, 2010 we had no outstanding forward exchange contracts.
Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt. Our variable rate debt consists of
short-term borrowings under our credit facilities. As of December 31, 2010, there were no outstanding balances under our variable rate
credit facility. A hypothetical change in average interest rates of one percentage point is not expected to have a material effect on our
financial position, results of operations or cash flows over the next fiscal year.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with
this report; see Item 15 of Part IV.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’ s management, including the Company’ s Chief Executive Officer
and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’ s
disclosure controls and procedures as of December 31, 2010. Based upon this evaluation, the Company’ s Chief Executive Officer and
Chief Financial Officer have concluded that the Company’ s disclosure controls and procedures are effective.
Inherent Limitations of Internal Controls over Financial Reporting
The Company’ s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. The Company’ s internal control over financial reporting includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’ s
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that the Company’ s receipts and expenditures are being made only in
accordance with authorizations of the Company’ s management and directors; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’ s assets that could have a material
effect on the Company’ s financial statements.
Management, including the Company’ s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’ s
internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods
are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management’s Report on Internal Control Over Financial Reporting
The Company’ s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under
the supervision and with the participation of Company’ s management, including the Chief Executive Officer and Chief Financial
Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on
the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that evaluation, the Company’ s Chief Executive Officer and Chief Financial Officer concluded that
the Company’ s internal control over financial reporting was effective as of December 31, 2010.