DSW 2011 Annual Report Download - page 60

Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
attributes as a result of the Merger.
Earnings Per Share-
Basic earnings (loss) per share is based on net income (loss) and a simple weighted average of Common Shares outstanding.
Diluted earnings (loss) per share reflects the potential dilution of Common Shares, related to outstanding stock options, stock appreciation rights,
warrants and PIES. See Note 9 for a detailed discussion of earnings per share.
Legal Proceedings and Claims-
The Company is involved in various legal proceedings that are incidental to the conduct of its business. DSW
records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. See Note 13 for a discussion of legal
proceedings.
Sale of Subsidiary Stock - Prior to the Merger, sales of stock by a subsidiary were accounted for by RVI as capital transactions.
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (“FASB”) issued an update to ASC 805, Business Combinations
related to
noncontrolling interests in consolidated financial statements. This guidance establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interest) and for the deconsolidation of a subsidiary. This guidance shall be applied
prospectively as of the beginning of the fiscal year in which this statement is initially adopted, except for the presentation and disclosure
requirements, which shall be applied retrospectively for all periods presented. This guidance was effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008, with early adoption prohibited. The adoption of this guidance during the first
quarter of fiscal year 2009 resulted in enhanced disclosures regarding the minority interests of DSW as well as some presentation changes of
noncontrolling interest within the balance sheets, statements of operations and statements of changes in shareholders' equity.
In June 2008, the FASB issued an update to ASC 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity
related to determining
whether an instrument (or embedded feature) is indexed to an entity's own stock. This guidance was effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, with early adoption prohibited. ASC 815-
10,
Derivatives and Hedging
specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company's
own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial
instrument. ASC 815-40 provides a new two-
step model to be applied in determining whether a financial instrument or an embedded feature is
indexed to an issuer's own stock and thus able to qualify for the ASC 815-
10 scope exception. The adoption of this guidance during the first
quarter of fiscal year 2009 resulted in the redesignation and reclassification of the VCHI Warrants from equity to liability within the balance
sheets. In addition, the VCHI Warrants were marked to market as of the date of the adoption and continued to be marked to market through their
expiration date.
In January 2010, the Financial Accounting Standards Board issued updates to existing guidance related to fair value measurements. As a result of
these updates, entities will be required to provide enhanced disclosures about transfers into and out of level 1 and level 2 classifications, provide
separate disclosures about purchases, sales, issuances and settlements relating to the tabular reconciliation of beginning and ending balances of the
level 3 classification and provide greater disaggregation for each class of assets and liabilities that use fair value measurements. Except for the
detailed level 3 disclosures, the new standard was effective for DSW and RVI for the first quarter of fiscal 2010 and both DSW and RVI adopted
the remaining provisions of the standard in the first quarter of fiscal 2011. The adoption did not have a material impact to the consolidated
financial statements.
In May 2011, the FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what
disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose
quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the
sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December
15, 2011. The Company does not expect the adoption of this update to materially affect its consolidated financial statements.
In June 2011, the FASB issued an update to existing guidance related to the presentation of comprehensive income. The main provisions of this
update provide that an entity that reports other comprehensive income has the option to present comprehensive income in either one or two
consecutive financial statements. The first option is a single statement that must present the components of net income and total net income, the
components of other comprehensive income and total other comprehensive income and a total for comprehensive income. The second option is a
two statement approach, in which an entity must present
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