Sally Beauty Supply 2007 Annual Report Download - page 96

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Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 107,Share-Based Payment, requires public companies to apply the rules of
Accounting Series Release No. 268 ("ASR 268"),Presentation in Financial Statements of Redeemable Preferred Stocks, to stock options with contingent cash
settlement provisions. ASR 268 requires securities with contingent cash settlement provisions, which are not solely in the control of the issuer, without regard to
probability of occurrence, to be classified outside of stockholders' equity. Share-based compensation plans that were previously under Alberto-Culver stock
option plans granted stock options to Company employees with a contingent cash settlement provision upon the occurrence of certain change in control events.
As such, the contingent cash settlement of the stock options as a result of such event would not be solely in the control of the Company or Alberto-Culver. In
accordance with ASR 268, the Company has reclassified $6.5 million from additional paid-in capital to "stock options subject to redemption" outside of
stockholders' equity on its consolidated balance sheet as of September 30, 2007. This amount will be reclassified back into additional paid-in capital in future
periods as the related stock options are exercised or canceled.
Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial
Liabilities—including an amendment of FASB Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments
reported in earnings at each subsequent reporting date. SFAS 159 is effective in fiscal years beginning after November 15, 2007. The Company is currently
assessing the effect of this pronouncement on the Company's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements ("SFAS 157"), which 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 in fiscal years beginning
after November 15, 2007. The Company is currently assessing the effect of this pronouncement on the Company's consolidated financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying the Misstatements
in Current Year Financial Statements ("SAB 108") which provides interpretive guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement. The Company implemented the provisions of SAB 108 during the first quarter of
fiscal year 2007 and it did not have a material impact on the Company's consolidated financial position, statements of earnings or cash flows.
In July 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FIN
48"). FIN 48 clarifies the accounting for the uncertainty in income taxes recognized by prescribing a recognition threshold that a tax position is required to meet
before being recognized in the financial statements. It also provides guidance on derecognition, classification, interest and penalties, interim period accounting
and disclosure. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have a material
impact on the Company's consolidated financial position, statements of earnings or cash flows.
3. Regis Agreement and Separation Transactions
On January 10, 2006, Alberto-Culver entered into an agreement with Regis Corporation ("Regis") to merge Sally Holdings with a subsidiary of Regis in a
tax-free transaction. Pursuant to the terms and conditions of the merger agreement, Sally Holdings was to be spun off to Alberto-Culver's stockholders by
F-14
Source: Sally Beauty Holding, 10-K, November 29, 2007