Staples 2015 Annual Report Download - page 129

APPENDIX C
STAPLES C-12
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Recent Accounting Pronouncements: In May 2014, a
pronouncement was issued that creates common revenue
recognition guidance for U.S. GAAP and International Financial
Reporting Standards. The new guidance supersedes most
preexisting revenue recognition guidance. The core principle
of the guidance is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. The new standard is effective for annual reporting
periods beginning after December 15, 2017, including interim
periods within that reporting period, with an option to adopt
the standard one year earlier. Staples intends to adopt the new
guidance in the first quarter of fiscal 2018. The new standard is
to be applied either retrospectively to each period presented or
as a cumulative-effect adjustment as of the date of adoption.
The Company is currently evaluating the impact of the new
pronouncement on its financial statements.
In April 2015, a pronouncement was issued that requires
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. The guidance is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15,
2015. Early adoption is permitted and retrospective application
is required. The Company adopted this standard in the first
quarter of fiscal 2015. The condensed consolidated balance
sheet as of January 31, 2015 included in these interim financial
statements reflects a restatement to reclassify unamortized
debt issuance costs of $1 million from Prepaid and other
current assets and $4 million from Other assets to Long-term
debt, net of current maturities. For debt issuance costs paid to
secure revolving credit facilities, the Company presents such
costs as assets on the balance sheet and amortizes them
ratably over the term of the credit agreement, regardless of
whether any borrowings are outstanding.
In September 2015, a pronouncement was issued that
eliminates the requirement to restate prior period financial
statements for measurement period adjustments following
a business combination. The guidance requires that the
cumulative impact of a measurement period adjustment be
recognized in the reporting period in which the adjustment
is identified. The portion of the adjustment which relates to
a prior period should either be presented separately on the
face of the income statement or disclosed in the notes. The
guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2015,
with early adoption permitted. The guidance is to be applied
prospectively to adjustments to provisional amounts that occur
after the effective date. The Company adopted this standard
in the third quarter of 2015. The Company did not have any
material measurement period adjustments in 2015.
In November 2015, a pronouncement was issued that
stipulates all deferred tax assets and liabilities are to be
classified and presented in the balance sheet as non-current
items. The guidance is effective for interim and annual periods
beginning after December 15, 2016 with early adoption
permitted, and may be applied either prospectively to all
deferred tax liabilities and assets or retrospectively to all periods
presented. The Company elected to adopt this guidance
effective January 30, 2016, and has applied the guidance
retrospectively. The Company restated its consolidated balance
sheet as of January 31, 2015 to reflect the reclassification of
$224 million of deferred tax assets and $2 million of deferred
tax liabilities from current to non-current.
In February 2016, a pronouncement was issued that
creates new accounting and reporting guidelines for leasing
arrangements. The new guidance requires organizations that
lease assets to recognize assets and liabilities on the balance
sheet related to the rights and obligations created by those
leases, regardless of whether they are classified as finance
or operating leases. Consistent with current guidance, the
recognition, measurement, and presentation of expenses and
cash flows arising from a lease primarily will depend on its
classification as a finance or operating lease. The guidance
also requires new disclosures to help financial statement users
better understand the amount, timing, and uncertainty of cash
flows arising from leases. The new standard is effective for
annual reporting periods beginning after December 15, 2018,
including interim periods within that reporting period, with
early application permitted. The new standard is to be applied
using a modified retrospective approach. The Company is
currently evaluating the impact of the new pronouncement on
its financial statements.
NOTE B — RESTRUCTURING CHARGES
2014 Restructuring Plan
In 2014 the Company announced a plan to close at least 225
retail stores in North America by the end of fiscal year 2015
(the “Store Closure Plan”). Pursuant to this plan the Company
closed 169 stores in 2014 and 73 stores during 2015. The
Store Closure Plan has been extended and the Company
expects to close approximately 50 additional stores during
2016. In connection with these closures, in 2016 the Company
expects to incur charges of approximately $30 million to
$60 million for contractual lease obligations, up to $5 million
for impairment and accelerated depreciation of store assets,
less than $5 million for severance and $10 million to $15 million
in other associated costs. These estimates could change as
the Company’s plans evolve and become finalized. These
charges relate to the Company’s North American Stores &
Online segment. The Company does not expect material costs
to be incurred after 2016 related to the Store Closure Plan.
In addition, in 2014 the Company initiated a cost savings
plan to generate annualized pre-tax savings of approximately
$500 million by the end of fiscal 2015. The Company plans to
reinvest some of the savings in its strategic initiatives. During
2015, the Company incurred liabilities for severance and
contractual obligations related to the restructuring of certain