Petsmart 2002 Annual Report Download - page 39

Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 144, ""Accounting for the Impairment or Disposal of Long-
Lived Assets,'' which supercedes SFAS No. 121, ""Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of'' and amends Accounting Principles Board Opinion, or APB, No. 30,
""Reporting the Results of Operations Ì Reporting the EÅects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.'' The new rules apply to the
classiÑcation and impairment analyses conducted on long-lived assets other than certain intangible assets. The
new rules also resolve conÖicting treatment of the impairment of long-lived assets and provide implementation
guidance regarding impairment calculations. SFAS No. 144 also expands the deÑnition of discontinued
operations to include all distinguishable components of an entity that will be eliminated from ongoing
operations in a disposal transaction. We adopted SFAS No. 144 in 2002, and the adoption did not have a
signiÑcant impact on our Ñnancial position or results of operations.
In May 2002, the FASB issued SFAS No. 145, ""Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002,'' that among other
things, rescinded SFAS No. 4, ""Reporting Gains and Losses from Extinguishment of Debt.'' With the
rescission of SFAS No. 4, companies generally will no longer classify early extinguishment of debt as an
extraordinary item. The provision is eÅective for Ñscal years beginning after May 15, 2002, and early
application is encouraged. We adopted the statement as of August 4, 2002, and as a result, reclassiÑed the gain
on early extinguishment of debt of $1.2 million and $4.7 million for 2001 and 2000, respectively, as a reduction
to general and administrative expenses. We also reclassiÑed the related income tax expense of $0.5 million and
$1.9 million for 2001 and 2000, respectively, to income tax expense.
In July 2002, the FASB issued SFAS No. 146, ""Accounting for Costs Associated with Exit or Disposal
Activities,'' which replaces Emerging Issues Task Force Issue No. 94-3, ""Liability Recognition for Certain
Employee Termination BeneÑts and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).'' The new standard requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The
statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do
not expect that the adoption will have a signiÑcant impact on our Ñnancial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, ""Accounting for Stock-Based Compensation Ì
Transition and Disclosure Ì an amendment of SFAS No. 123.'' This statement provides alternative methods
of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. This statement also amends the disclosure requirements of SFAS No. 123 and ABP No. 28,
""Interim Financial Reporting,'' to require prominent disclosures in both annual and interim Ñnancial
statements about the method of accounting for stock-based employee compensation and eÅect of the method
used on reported results. We have implemented the disclosure requirements of SFAS No. 148 for Ñscal 2002
reporting, and eÅective February 2, 2003 regarding disclosure requirements for condensed Ñnancial statements
for interim periods. We will continue to account for stock-based compensation under APB Opinion No. 25,
""Accounting for Stock Issued to Employees''.
In November 2002, the FASB issued Interpretation No. (FIN) 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Among
other things, the Interpretation requires guarantors to recognize, at fair value, their obligations to stand ready
to perform under certain guarantees. FIN 45 is eÅective for guarantees issued or modiÑed on or after
January 1, 2003. We have adopted the disclosure requirements of FIN 45 which is eÅective for Ñscal years
ending after December 15, 2002. We believe the adoption of FIN 45 will not have a signiÑcant impact on our
Ñnancial position and future results of operations. FIN 45 also requires guarantors to disclose certain
information for guarantees outstanding at February 2, 2003.
The FASB issued FIN 46, ""Consolidation of Variable Interest Entities,'' an interpretation of Accounting
Research Bulletin No. 51, ""Consolidated Financial Statements,'' on January 17, 2003. FIN 46 requires that an
entity holding a majority of the ""variable interest'' of a ""variable interest entity'' must consolidate the
operations of the variable interest entity of which it is the primary beneÑciary. As currently constituted, our
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