Restoration Hardware 2015 Annual Report Download - page 80

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Consolidation Accounting
In February 2015, the FASB issued Accounting Standards Update No. 2015-02—Consolidation (Topic 810): Amendments to the
Consolidation Analysis, which improves targeted areas of the consolidation guidance and reduces the number of consolidation models.
The amendments to the guidance are effective for fiscal years beginning after December 15, 2015 (the Company’s first quarter of
fiscal 2016), and interim periods within those years, with early adoption permitted. The Company does not currently believe this
guidance will have a material impact on its consolidated financial statements.
Classification of Debt Issuance Costs
In April 2015, the FASB issued Accounting Standards Update 2015-03—Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. Costs associated with line-of-credit arrangements may continue to be recorded as deferred assets. The
update requires retrospective application and represents a change in accounting principle. The debt issuance costs guidance is effective
for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU 2015-03 will be effective for
the Company in its first quarter of fiscal 2016. Early adoption is permitted. The Company has elected not to early adopt. Other than
reclassifying $2.1 million as of January 30, 2016 from non-current assets to non-current liabilities on the consolidated balance sheets,
the Company does not expect a material impact on its consolidated financial statements upon adoption.
Software Licenses in Cloud Computing Arrangements
In April 2015, the FASB issued Accounting Standards Update No. 2015-05—Intangibles—Goodwill and Other—Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in ASU
2015-05 provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud
computing arrangement includes a software license, the customer should account for the software license element of the arrangement
consistent with other software licenses. If a cloud computing arrangement does not include a software license, the customer should
account for the arrangement as a service contract. The amendments in ASU 2015-05 are effective for fiscal years beginning after
December 15, 2015, and interim periods within those years. Early adoption is permitted. The guidance may be applied either
prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. The Company does not
currently believe this guidance will have a material impact on its consolidated financial statements.
Measurement of Inventory
In July 2015, the FASB issued Accounting Standards Update 2015-11—Inventory (Topic 330): Simplifying the Measurement of
Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net
realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. The guidance must be applied on a prospective basis and is
effective for periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-11 will be effective for the
Company in its first quarter of fiscal 2016. The Company does not currently believe this guidance will have a material impact on its
consolidated financial statements.
Business Combinations
In September 2015, the FASB issued Accounting Standards Update 2015-16—Business Combinations (Topic 805): Simplifying
the Accounting for Measurement-Period Adjustments. The guidance requires the acquirer to recognize adjustments to provisional
amounts identified during the measurement period in the reporting period in which the adjustment amounts are determined. The
business combination guidance is effective for interim and annual periods beginning after December 15, 2015, with early adoption
permitted, and is to be applied on a prospective basis. The Company has elected not to early adopt. The Company is evaluating the
impact of adopting this new accounting standard on its consolidated financial statements.
Classification of Deferred Taxes
In November 2015, the FASB issued Accounting Standards Update 2015-17—Income Taxes (Topic 740): Balance Sheet
Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The amendments in ASU 2015-17 require that
deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The current requirement
that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected
by the amendments in the update. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, and interim periods
within those years, and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods