Family Dollar 2006 Annual Report Download - page 39

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New accounting pronouncements:
In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123R which requires all companies to measure
compensation cost for all share−based payments (including employee stock options) at fair value, effective for public companies for
interim or annual periods beginning after June 15, 2005. The FASB concluded that companies can adopt the new standard in one of
two ways: the modified prospective transition method, in which the company would recognize share−based employee compensation
from the beginning of the fiscal period in which the recognition provisions are first applied as if the fair−value−based accounting
method had been used to account for all employee awards granted, modified, or settled after the effective date and to any awards that
were not fully vested as of the effective date; or the modified retrospective transition method, in which a company would recognize
employee compensation cost for periods presented prior to the adoption of SFAS 123R in accordance with the original provisions of
SFAS 123 “Accounting for Stock−Based Compensation” (“SFAS 123”), pursuant to which a company would recognize employee
compensation cost in the amounts reported in the pro forma disclosures provided in accordance with SFAS 123. The Company
adopted SFAS 123R during the first quarter of fiscal 2006 using the modified prospective transition method.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 replaces
Accounting Principles Board Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim
Financial Statements.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle.
SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The
Company does not expect SFAS 154 to have a material impact on its Consolidated Financial Statements.
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides
guidance regarding the recognition and measurement of tax positions and the related reporting and disclosure requirements and will be
effective for the Company beginning with its first quarter of fiscal 2008. The Company has not yet determined the impact, if any, that
FIN 48 will have on its Consolidated Financial Statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements. SFAS 157 is effective for the first annual period ending after November 15, 2007. The Company has not yet
determined the impact, if any, that SFAS 157 will have on its Consolidated Financial Statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on the consideration of
the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108
requires quantification of financial statement errors based on the effects of the error on each of the company’s financial statements and
the related financial statement disclosures. This approach is referred to as the “dual approach” because it requires both the carryover
and reversing effects of prior year misstatements to be quantified. SAB 108 is effective for the first annual period ending after
November 15, 2006. The Company is currently assessing the impact that SAB 108 will have on its Consolidated Financial
Statements.
Reclassifications:
Certain reclassifications of the amounts for fiscal 2005 and fiscal 2004 have been made to conform to the presentation for fiscal 2006.
These include interest income, which was previously included in selling, general and administrative expenses.
2. Investment Securities
The Company’s investments consist of the following short−term available−for−sale securities (in thousands):
Gross Gross
Unrealized Unrealized
Amortized Holding Holding
Auction Rate Securities And Variable Rate Demand Notes Cost Gains Losses Fair Value
August 26, 2006 $ 136,505 — — $ 136,505
August 27, 2005 $ 33,530 — — $ 33,530
32
Source: FAMILY DOLLAR STORES, 10−K, March 28, 2007