Staples 2006 Annual Report Download - page 114

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STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-10
NOTE A Summary of Significant Accounting Policies (Continued)
New Accounting Pronouncements:In July 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for
uncertain income tax positions that are recognized in a company’s financial statements in accordance with the provisions
of FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 also provides guidance on the derecognition of
uncertain positions, financial statement classification, accounting for interest and penalties, accounting for interim
periods and new disclosure requirements. FIN 48 is effective for fiscal years beginning after December 15, 2006. While
the Company’s analysis of the impact of this Interpretation is not yet complete, the Company does not anticipate it will
have a material impact on the Company’s retained earnings at the time of adoption.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 157, “Fair Value Measurements”, (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The
adoption of SFAS No. 157 is not expected to have a material impact on the Company’s financial position, results of
operations or cash flows.
Reclassifications: Certain previously reported amounts have been reclassified to conform with the current period
presentation.
NOTE B Business Acquisitions and Equity Method Investments
In accordance with SFAS No. 141 “Business Combinations,” Staples records acquisitions under the purchase
method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible
assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as
goodwill. Under SFAS No. 142, goodwill and purchased intangibles with indefinite lives are not amortized but are
reviewed for impairment annually, or more frequently, if impairment indicators arise. Purchased intangibles with definite
lives are amortized over their respective useful lives.
During 2006, the Company paid an aggregate of $52.7 million to acquire all or a majority interest in certain delivery
businesses headquartered in the United States and Taiwan and increased the Company’s previous investment in a
delivery business in the People’s Republic of China. The results of these businesses have been included in the
consolidated financial statements since the dates of acquisition.
During 2006, the Company recorded $16.5 million of goodwill and $13.0 million of intangible assets for all
acquisitions and investments completed in 2006, of which $2.9 million of the goodwill recorded is expected to be
deductible for tax purposes. The $13.0 million recorded for intangible assets was assigned to trade names and customer
related intangible assets that will be amortized over a weighted average life of 4.4 years.
During 2004, the Company paid an aggregate of $114.7 million to acquire Officenet SA, a mail order and internet
company operating in Argentina and Brazil, Pressel Versand International GmbH, a mail order company based in
Austria and operating in nine European countries, Malling Beck A/S, a mail order company based in Denmark, and
Globus Office World plc (“Office World”), a United Kingdom office products company. In connection with the
acquisition of Office World, Staples accrued approximately $17.2 million for merger-related and integration costs,
reflecting costs associated with planned Office World store closures, a distribution center closure, severance and
transaction related costs. As of February 3, 2007, approximately $6.7 million has been charged against this accrual and
$10.5 million remains accrued for these merger-related and integration costs. Additionally, in 2004, the Company
entered the Asian market by investing in a delivery business in the People’s Republic of China (“Staples China”). The
Company has been the majority shareholder of Staples China since the first quarter of 2005.