DSW 2012 Annual Report Download - page 56

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amount. The guidance also includes examples of the types of factors to consider in conducting the qualitative assessment. This
update was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update in the first
quarter of fiscal 2012 did not affect the Company's consolidated financial statements.
Intangible Assets- In July 2012, the FASB issued an update to existing guidance related to impairment testing for indefinite-
lived intangible assets. The amendments will allow an entity to first assess qualitative factors to determine whether it is
necessary to perform the quantitative impairment test. An entity no longer will be required to test the fair value of an intangible
asset unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than
its carrying amount. This update is effective for interim and annual periods beginning after September 15, 2012. The adoption
of this update in the fourth quarter of fiscal 2012 did not affect the Company's consolidated financial statements.
3. MERGER WITH RETAIL VENTURES, INC. AND DISCONTINUED OPERATIONS
Merger with Retail Ventures, Inc. ("the Merger")- On May 26, 2011, Retail Ventures, Inc. (“Retail Ventures” or “RVI”)
merged with and into DSW MS LLC (“Merger Sub”), with Merger Sub surviving the Merger and continuing as a wholly owned
subsidiary of DSW. Upon the closing of the Merger, each outstanding RVI common share was converted into 0.435 DSW Class
A Common Shares, unless the holder of each outstanding RVI common share properly and timely elected to receive a like
amount of DSW Class B Common Shares. In connection with the Merger, RVI shareholders received 10.6 million DSW Class
A Common Shares and 11.5 million DSW Class B Common Shares. Prior to the Merger, RVI held 27.4 million DSW Class B
Common Shares, which were retired in the third quarter of fiscal 2011. RVI common shares, without par value, which traded
under the symbol “RVI,” ceased trading on, and were delisted from, the New York Stock Exchange on May 26, 2011.
The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW (the surviving legal entity) as
the accounting acquiree. As this was a common control transaction under ASC 805, Business Combinations, the Merger was
accounted for as an equity transaction in accordance with ASC 810, Consolidation as the acquisition of a noncontrolling
interest, and purchase accounting was not applied. As a result, there was no adjustment to RVI's historical cost carrying
amounts of assets and liabilities reflected in the accompanying balance sheet. For financial reporting purposes, the Merger was
accounted for as if the following transactions took place:
• RVI acquired all of the outstanding noncontrolling interests in DSW in exchange for 17.1 million newly issued
Class A Common Shares, thus eliminating the noncontrolling interests. Legally, these DSW Class A Common
Shares are the shares that were publicly held prior to the Merger;
• RVI declared and implemented a reverse stock split at an exchange ratio of 0.435 applicable to all outstanding
Common Shares;
• RVI established a new class of unregistered common shares, Class B Common Shares, with special voting rights.
DSW Class A Common Shares are entitled to one vote for each share. DSW Class B Common Shares are entitled
to eight votes for each share; and
• RVI offered to all common shareholders as of the date immediately prior to the closing of the Merger, the
opportunity to tender Class A Common Shares in exchange for newly issued Class B Common Shares, resulting in
the issuance of 11.5 million Class B Common Shares and the retirement of the same number of Class A Common
Shares.
Pre-merger financial information presented in the DSW consolidated financial statements represents consolidated RVI financial
information. References to Retail Ventures or RVI refer to the pre-merger entity. The pre-merger financial information was
retrospectively recast in fiscal 2011 for the following matters:
• Share and per share information- DSW recast all RVI historical share and per share information, including
earnings per share, to reflect the exchange ratio of 0.435 for periods prior to the Merger.
• Segment presentation- DSW maintained its historical segment presentation, which is consistent with how the chief
operating decision maker, as defined in ASC 280, Segment Reporting, reviews the business. DSW sells products
through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the
DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group
segment. In order to reconcile to the consolidated financial statements, DSW includes Other, which consists of
assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-merger or prior
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS