True Value 2009 Annual Report Download - page 33

Notes To Consolidated Financial Statements
($ in thousands)
18 True Value Company
PER SHARE INFORMATION
True Value’s Redeemable Class A voting common stock is owned
by members. True Value’s Redeemable Class B nonvoting com-
mon stock now outstanding was issued to members in partial
payment of the annual patronage dividend. There is no existing
market for True Value common stock and there is no expectation
that any market will develop. Accordingly, no earnings per share
information is presented in the Consolidated Financial Statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of True Value’s financial instruments, which
were comprised primarily of accounts and notes receivable,
accounts payable, short-term borrowings, long-term debt, and
subordinated promissory and subordinated promissory install-
ment notes, approximate fair value. The total carrying amount
of debt and credit facilities approximates fair value due to True
Value’s obligation to redeem them at carrying value and the
inability of the notes to trade in a market outside of True Value.
CONCENTRATION OF CREDIT RISK
Credit risk pertains primarily to True Value’s trade receivables.
True Value extends credit to its members as part of its day-to-day
operations. True Value believes that because no specific receiv-
able or group of receivables comprises a significant percentage
of total trade accounts, its risk with respect to trade receivables
is limited. Additionally, True Value’s management believes that
its allowance for doubtful accounts is adequate with respect to
member credit risks. Also, the Certificate of Incorporation and
By-Laws specifically provide that True Value may set off its obliga-
tion to make any payment to a member for such member’s stock,
notes, interest, and declared and unpaid dividends against any
obligation owed by the member to True Value. True Value, but
not the member, may at its sole discretion exercise these set-off
rights when any such funds become due to former members with
outstanding accounts receivable to True Value and current mem-
bers with past due accounts receivable to True Value.
USE OF ESTIMATES
The preparation of financial statements in conformity with account-
ing principles generally accepted in the United States of America
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accom-
panying notes. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2009, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Codification (“Codification”) 105-10
(Prior authoritative literature SFAS No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles”) making the Codification the single source
of authoritative U.S. generally accepted accounting policies
(“GAAP”) for nongovernmental entities. The Codification is
effective for financial statements issued for interim and annual
periods ending after September 15, 2009. While not intended to
change U.S. GAAP, the Codification significantly changes the way
in which accounting literature is organized. True Value adopted
this Codification as of October 3, 2009.
In May 2009, the FASB issued Codification 855 (Prior authoritative
literature SFAS No. 165, “Subsequent Events”), which establishes
general standards of accounting for and disclosure of events that
occur after the balance sheet date but before the financial state-
ments are issued or are available to be issued. The Codification
is effective for financial statements issued for interim and annual
periods ending after June 15, 2009. True Value adopted this Cod-
ification as of July 1, 2009. True Value has determined as of March
10, 2010, the date the financial statements were available to be
issued, that no material subsequent events in accordance with this
guidance have occurred that require adjustments or disclosures.
In December 2008, the FASB issued Codification 715-20-62-2 (Prior
authoritative literature SFAS 132(revised)-1, “Employers’ Disclo-
sures about Postretirement Benefit Plan Assets”), which requires
employers to disclose information about fair value measurements
of plan assets that are similar to the disclosures about fair value
measurements required by Codification 820-10 (Prior authorita-
tive literature SFAS No. 157 “Fair Value Measurements”). The
Codification for “Employers’ Disclosures about Postretirement
Benefit Plan Assets” was effective for True Value’s 2009 annual
financial statements.
In June 2006, the FASB issued Codification 740-10 (Prior author-
itative literature FIN 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement 109”) to create a
single model to address accounting for uncertainty in tax posi-
tions. True Value adopted this Codification as of December 30,
2007. Based upon a review of prior tax returns and other relevant
information, True Value has determined that a net operating loss
claimed on a prior tax return does not meet the more-likely-than-
not standard under this Codification. However, the adoption of
this Codification does not have an impact on True Value’s finan-
cial statements because True Value never recorded a tax benefit
for the net operating loss in prior year financial statements.
Other recent accounting standard updates issued by FASB are not
believed by True Value’s management to have a material impact
on True Value’s condensed consolidated financial statements.