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Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long-
lived assets, primarily property and equipment,
and finite lived intangible assets when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying
amount of a long-
lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the expected future
cash flows from the asset or asset group. The reviews are conducted at the lowest identifiable level, which includes a store. The impairment loss
recognized is the excess of
the carrying value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a
discount rate determined by management. Should an impairment loss be realized, it will generally be included in cost of sales.
In fiscal 2011 , DSW recognized an impairment loss of $1.6 million
on assets used in a leased office facility assumed in the Merger. Based on the
projected future cash flows under the lease, DSW determined that the carrying value exceeded the expected future cash flows from the asset group
and recorded a full impairment after determining fair value. The impairment of the related lease is discussed in Note 13
. There were no
impairment charges in fiscal 2010. In fiscal 2009 , long-
lived assets held and used with a carrying amount of $1.9 million were written down to
their fair value of $1.0 million, resulting in an impairment charge of $0.9 million , which was included in earnings for fiscal 2009 .
The following table presents the activity related to the fair value of assets held and used that realized an impairment loss for the periods presented:
Basic earnings per share is based on net income and a simple weighted average of common shares outstanding. For periods prior to the Merger,
share count was determined by adjusting all historical RVI shares by the exchange ratio of 0.435.
Diluted earnings per share reflects the potential dilution of common shares adjusted, related to outstanding RVI stock options and SARs (prior to
the Merger), outstanding DSW stock options (after the Merger) and warrants calculated using the treasury stock method. As PIES are
exchangeable for DSW Class A Common Shares, they are included as potentially dilutive instruments based on the DSW common share price,
after the Merger and before the settlement.
For all periods presented, where there was a loss in fair value of warrants (prior to and after the Merger) and PIES (after the Merger), the loss was
included in the calculation of the net income and the corresponding shares were excluded from the diluted share count, if the effect was anti-
dilutive.
The following is a reconciliation of the net income used in the calculation of diluted earnings (loss) per share computations for the periods
presented for net income (loss) from continuing operations, net of noncontrolling interests:
F-27
Fiscal years ended
January 28, 2012
January 29, 2011
(in thousands)
Carrying value at the beginning of the period
$
952
$
1,151
Activity related to equity investment – related party
199
(199
)
Carrying value at the end of the period
$
1,151
$
952
Total Losses
As of January 28, 2012
Fiscal years ended
Level 1 Level 2 Level 3
Fair Value as
of the
Impairment
Date
January 28, 2012
January 29, 2011
January 30, 2010
(in thousands)
(in thousands)
Assets held and used
$
0
$
0
$
1,626
$
856
9.
EARNINGS PER SHARE