DSW 2015 Annual Report Download - page 55

Table of Contents
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Consistent with the current accounting for the customer loyalty program, costs associated with rewards points and certificates are accrued as the points are
earned by the cardholder and are recorded in cost of sales. Administrative costs related to the co-branded credit card program, including payroll, store
expenses, marketing expenses, depreciation and other direct costs, are recorded in operating expenses.
 In anticipation of funding the future purchase of the remaining interest in Town Shoes, the Company
purchased $100 million CAD, which equated to approximately $79 million USD at the purchase date. Gains or losses resulting from foreign currency
transactions are included in operating expenses in the consolidated statement of operations, whereas translation adjustments are reported as an element of
other comprehensive income.
The note receivable and the payment-in-kind interest from Town Shoes are denominated in CAD. The functional and reporting currency of Town Shoes is
CAD. As USD is the functional currency of the entity that holds the investment in and note receivable from Town Shoes, the Company is required to
remeasure these balances into USD balances. Each quarter, the income or loss from Town Shoes is recorded in USD at the average exchange rate for the
period. The note receivable from Town Shoes is remeasured in USD at the exchange rate prevailing at the balance sheet date. As the Company has designated
the note receivable from Town Shoes as an investment of a long-term investment nature, the Company records the translation gains and losses arising from
changes in exchange rates in comprehensive income.
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In May 2014, the FASB and the International Accounting Standards Board ("IASB") released ASU 2014-09 on the recognition of revenue from contracts with
customers that is designed to create greater comparability for financial statement users across industries and jurisdictions. Under the new standard, companies
will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled
in exchange for those goods or services. The standard also will require enhanced disclosures and provide more comprehensive guidance for transactions such
as service revenue and contract modifications. The standard will take effect for public companies for annual reporting periods beginning after December 15,
2017, including interim reporting periods. The Company has completed an assessment identifying areas of impact for the business, including the Company's
loyalty program and co-branded credit card. We are currently assessing and evaluating these results and developing an implementation plan, as well as
evaluating the transition methods for adoption of the standard.
In April 2015, the FASB and the IASB released ASU 2015-03, simplifying the presentation of debt issuance costs. Under the new standard, debt issuance
costs related to a recognized debt liability will be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. The standard will take effect for public companies for annual reporting periods beginning after December 15, 2015, including
interim reporting periods. There is currently no impact to the Company; however, the Company will monitor the new standard and determine if it is likely to
be impacted in the future.
In April 2015, the FASB released ASU 2015-05 to provide guidance to customers concerning whether a cloud computing arrangement includes a software
license. Under this new standard, 1) if a cloud computing arrangement includes a software license, the software license element of the arrangement should be
accounted for in a manner consistent with the acquisition of other software licenses, or 2) if the arrangement does not include a software license, the
arrangement should be accounted for as a service contract. The standard will take effect for public companies for annual reporting periods beginning after
December 15, 2015, including interim reporting periods. The Company will adopt the new standard when it takes effect in the first quarter of 2016 and apply
the new guidance prospectively.
In January 2016, the FASB released ASU 2016-01, which 1) requires equity investments (except those accounted for under the equity method of accounting
or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, 2) simplifies the
impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, 3)
eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities, 4)
eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to
be disclosed for financial instruments measured at amortized cost on the balance sheet, 5) requires public business entities to use the exit price notion when
measuring the fair value of financial instruments for disclosure purposes, 6) requires an entity to present separately in other comprehensive income the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure
the liability at fair value in accordance with the fair value option for financial instruments, 7) requires separate presentation of financial assets and financial
liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the
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Source: DSW Inc., 10-K, March 24, 2016 Powered by Morningstar® Document Research℠
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