CompUSA 2011 Annual Report Download - page 45

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Fair Value Measurements - 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, 2011 and 2010, 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.
The fair value of goodwill and non-amortizing intangibles is measured on a non-recurring basis in connection with the Company’s annual
impairment testing. For goodwill, the fair value of the reporting unit to which the goodwill has been assigned is determined using a discounted
cash flow model. A discounted cash flow model is also used to determine fair value of indefinite-lived intangibles using projected cash flows of
the intangible. Unobservable inputs related to these discounted cash flow models include projected sales growth, same store sales growth, gross
margin percentages, new business opportunities, working capital requirements, capital expenditures and growth in selling, general and
administrative expense and are classified in accordance with ASC 820, “Fair Value Measurements and Disclosures”, within Level 3 of the
valuation hierarchy.
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 2011, the FASB issued guidance which provides companies with the option to perform a qualitative assessment to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing updated qualitative factors, a
company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not have to perform
the current two-
step goodwill impairment test. The Company adopted this guidance in October 2011. The adoption of this guidance did not have
a material impact on the consolidated financial statements.
In June 2011, the FASB issued amended guidance related to comprehensive income. The amended guidance requires the presentation of items
of net income, items of other comprehensive income and total comprehensive income in one continuous statement or in two separate but
consecutive statements. Presentation of other comprehensive income as part of the statement of stockholders’ equity is no longer allowed under
the amended guidance. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15,
2011. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
In December 2010, the FASB issued authoritative guidance that updates existing disclosure requirements related to supplementary pro forma
information for business combinations. Under the updated guidance, a public entity that presents comparative financial statements should
disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as
of the beginning of the comparable prior annual reporting period only. The guidance also expands the supplemental pro forma disclosures to
include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination
included in the reported pro forma revenue and earnings. This guidance became effective for the Company on January 1, 2011 and will be
applied prospectively to business combinations that have an acquisition date on or after January 1, 2011.
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