Sally Beauty Supply 2013 Annual Report Download - page 115

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2013, 2012 and 2011
Income Taxes
The Company recognizes deferred income taxes for the estimated future tax consequences attributable to
temporary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which temporary differences are estimated to be
recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated
statements of earnings in the period of enactment. A valuation allowance is recorded to reduce the
carrying amounts of deferred tax assets to the amount expected to be realized unless it is
more-likely-than-not that such assets will be realized in full. The estimated tax benefit of an uncertain tax
position is recorded in our financial statements only after determining a more-likely-than-not probability
that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.
Foreign Currency
The functional currency of each of the Company’s foreign operations is generally the respective local
currency. Balance sheet accounts are translated into U.S. dollars (the Company’s reporting currency) at
the rates of exchange in effect at the balance sheet date, while the results of operations are translated using
the average exchange rates during the period presented. The resulting translation adjustments are
recorded as a component of accumulated other comprehensive income (‘‘AOCI’’) in our consolidated
balance sheets. Foreign currency transaction gains or losses are included in our consolidated statements of
earnings when incurred and were not significant in any of the periods presented in the accompanying
financial statements.
3. Recent Accounting Pronouncements and Accounting Changes
Recent Accounting Pronouncements
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income, to improve the reporting of reclassifications out of AOCI. This
amendment requires an entity to present the changes in each component of AOCI for the periods
presented, to separately report significant amounts reclassified from each component of AOCI and to
disclose among other things the components, if any, of net income affected by such reclassifications. The
disclosures about such reclassifications must be presented either parenthetically on the face of the financial
statements or disclosed in the notes to the financial statements. As permitted, the Company adopted the
provisions of ASU No. 2013-02 effective January 1, 2013 and its adoption did not have a material effect on
the Company’s consolidated financial position, results of operations or cash flows.
In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment,
which amended ASC Topic 350, Intangibles-Goodwill and Other (‘‘ASC 350’’). This amendment allows an
entity to first assess relevant qualitative factors in order to determine whether it is necessary to perform the
quantitative impairment test for indefinite-lived intangible assets otherwise required under ASC 350. In
effect, the amendment eliminates the need to calculate the fair value of an indefinite-lived intangible asset
in connection with the impairment test unless the entity determines, based on the qualitative assessment,
that it is more likely than not that the asset is impaired. As permitted, the Company adopted the provisions
of ASU No. 2012-02 effective January 1, 2013 and its adoption did not have a material effect on the
Company’s consolidated financial position, results of operations or cash flows.
In June 2011, the FASB issued ASU No. 2011-05 which amended ASC Topic 220, Comprehensive Income
(‘‘ASC 220’’). This amendment, which must be applied retrospectively, allows an entity the option to
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