Restoration Hardware 2014 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2014 Restoration Hardware annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

Recently Issued Accounting Pronouncements
Accounting for Leases
The Financial Accounting Standards Board (“FASB”) is currently working on amendments to existing
accounting standards governing a number of areas including, but not limited to, accounting for leases. In May
2013, the FASB issued an Accounting Standards Update (Revised), Leases (Topic 842) (the “Exposure Draft”),
which would replace the existing guidance in ASC 840—Leases (“ASC 840”). Under the Exposure Draft, among
other changes in practice, a lessee’s rights and obligations under most leases, including existing and new
arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. Other significant
provisions of the Exposure Draft include (i) defining the “lease term” to include the noncancellable period
together with periods for which there is a significant economic incentive for the lessee to extend or not terminate
the lease; (ii) defining the initial lease liability to be recorded on the balance sheet to contemplate only those
variable lease payments that depend on an index or that are in substance “fixed”; and (iii) a dual approach for
determining whether lease expense is recognized on a straight-line or accelerated basis, depending on whether
the lessee is expected to consume more than an insignificant portion of the leased asset’s economic benefits. The
comment period for the Exposure Draft ended on September 13, 2013. If and when effective, this Exposure Draft
will likely have a significant impact on our consolidated financial statements. However, as the standard-setting
process is still ongoing, we are unable to determine the impact this proposed change in accounting standards will
have on our consolidated financial statements.
Presentation of Unrecognized Tax Benefits
In July 2013, the FASB issued an Accounting Standards Update 2013-11—Income Taxes (Topic 740),
which requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented
in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar
tax loss, or a tax credit carryforward, with certain exceptions. This guidance is effective for annual and interim
reporting periods beginning after December 15, 2013, with early adoption permitted. We adopted this guidance
in the first quarter of fiscal 2014 and adoption did not have a material impact on our consolidated financial
statements.
Revenue from Contracts with Customers
In May 2014, the FASB and International Accounting Standards Board issued their converged accounting
standard update on revenue recognition, Accounting Standards Update 2014-09—Revenue from Contracts with
Customers (Topic 606). This guidance outlines a single comprehensive model for companies to use in accounting
for revenue arising from contracts with customers and supersedes most current revenue recognition guidance,
including industry-specific guidance. The core principle of the revenue model is that revenue is recognized when
a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the
use of and obtain the benefits from the good or service. Under the new guidance, transfer of control is no longer
the same as transfer of risks and rewards as indicated in prior guidance. We will also need to apply new guidance
to determine whether revenue should be recognized over time or at a point in time. This guidance is effective
retrospectively for fiscal years and interim periods within those years beginning after December 15, 2016 (our
first quarter of fiscal 2017). We do not currently believe the guidance will have a material impact on our
consolidated financial statements.
Consolidation Accounting
In February 2015, the FASB issued Accounting Standards Update No. 2015-02—Amendments to the
Consolidation Analysis (Topic 810), which improves targeted areas of the consolidation guidance and reduces the
number of consolidation models. The amendments in the guidance are effective for fiscal years and interim
periods within those years beginning after December 15, 2015 (our first quarter of fiscal 2016), with early
adoption permitted. We are currently evaluating the effect the guidance will have on our consolidated financial
statements.
69