OTHER COMMENTS
Included in accrued expenses on the Company’s Consolidated Balance Sheets are certain wholesale sales allowance accruals of $91,607 and $50,981 as of February 2, 2014 and February 3, 2013, respectively.
The Company’s asset retirement obligations are included in other liabilities on the Company’s Consolidated Balance Sheets and relate to the Company’s obligation to dismantle or remove leasehold improvements from leased office or retail store locations at the end of a lease term in order to restore a facility to a condition specified in the lease agreement. The Company records the fair value of the liability for asset retirement obligations in the period in which it is legally or contractually incurred. Upon initial recognition of the asset retirement liability, an asset retirement cost is capitalized by increasing the carrying amount of the asset by the same amount as the liability. In periods subsequent to initial measurement, the asset retirement cost is recognized as expense through depreciation over the asset’s useful life. Changes in the liability for the asset retirement obligations are recognized for the passage of time and revisions to either the timing or the amount of estimated cash flows. Accretion expense is recognized in selling, general and administrative expenses for the impacts of increasing the discounted fair value to its estimated settlement value.
The following table presents the activity related to the Company’s asset retirement obligations for each of the last two years:
|
| | | | | | | |
| 2013 | | 2012 |
Balance at beginning of year | $ | 12,503 |
| | $ | 11,709 |
|
Business acquisitions | 2,222 |
| | — |
|
Liabilities incurred | 2,573 |
| | 2,585 |
|
Liabilities settled (payments) | (923 | ) | | (1,160 | ) |
Accretion expense | 498 |
| | 294 |
|
Revisions in estimated cash flows | 358 |
| | 273 |
|
Currency translation adjustment | (690 | ) | | (1,198 | ) |
Balance at end of year | $ | 16,541 |
| | $ | 12,503 |
|
The results of operations for the year ended February 2, 2014 includes income of $24,309 related to the amendment of an unfavorable contract. At the time of the Tommy Hilfiger acquisition in 2010, a liability was recorded for such unfavorable contract. The amendment executed in 2013 adjusted the contract terms thereby reducing the amount by which the contract was unfavorable and resulted in a reduction of the liability, amounting to $24,309. Please see Note 19, “Segment Data,” for a further discussion.
The Company is a party to certain litigation which, in management’s judgment, based in part on the opinions of legal counsel, will not have a material adverse effect on the Company’s financial position.
