Safeway 2004 Annual Report Download - page 41

In December 2004, the FASB issued FASB Staff Position
SFAS No. 109-2, “Accounting Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American
Jobs Creation Act of 2004,” which provides accounting and
disclosure guidance for the repatriation provisions of the
American Jobs Creation Act of 2004 (the “Act”). The Act
provides for a special one-time tax deduction of certain
earnings repatriated in 2005. The Company is evaluating
whether to take advantage of this provision with respect to
its Canadian subsidiary, and expects to complete the
evaluation by the fourth quarter of 2005. The Company
anticipates that it could repatriate between zero and $734
million, and that the tax cost of the repatriation would be
between zero and $75 million.
In December 2004, the FASB issued FASB Staff Position
SFAS No. 109-1, “Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American
Jobs Creation Act of 2004,” which provides accounting and
disclosure guidance on the Act’s qualified production
activities deduction. The Company is currently evaluating
the impact of this guidance on its effective tax rate for 2005
and subsequent periods.
In December 2004, the FASB issued SFAS No. 123
(Revised 2004), “Share-Based Payment” (“SFAS No. 123R”),
which replaces SFAS No. 123, supersedes APB 25 and
related interpretations and amends SFAS No. 95,
“Statement of Cash Flows.” The provisions of SFAS No. 123R
are similar to those of SFAS No. 123; however, SFAS No.
123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized
in the financial statements as compensation cost based on
their fair value on the date of grant. Fair value of share-
based awards will be determined using option-pricing
SAFEWAY INC. 2004 ANNUAL REPORT 39
SAFEWAY INC. AND SUBSIDIARIES
Note B: Goodwill
A summary of changes in Safeway’s goodwill during 2004 and 2003 by geographic area is as follows:
(In millions) 2004 2003
U.S. Canada Total U.S. Canada Total
Balance – beginning of the year $2,328.3 $76.6 $2,404.9 $3,062.9 $62.8 $3,125.7
Impairment charges –––(729.1) –(729.1)
Other adjustments (2.7)(1) 4.4(2) 1.7 (5.5)(1) 13.8(2) 8.3
Balance – end of year $2,325.6 $81.0 $2,406.6 $2,328.3 $76.6 $2,404.9
(1) Primarily represents revised estimate of pre-acquisition tax accrual.
(2) Represents foreign currency translation adjustments in Canada.
models (e.g. Black-Scholes or binomial models) and
assumptions that appropriately reflect the specific circum-
stances of the awards. Compensation cost will be
recognized over the vesting period based on the fair value
of awards that actually vest.
The Company will be required to choose between the
modified-prospective and modified-retrospective transition
alternatives in adopting SFAS No. 123R. Under the modified-
prospective-transition method, compensation cost will be
recognized in financial statements issued subsequent to the
date of adoption for all shared-based payments granted,
modified or settled after the date of adoption, as well as for
any unvested awards that were granted prior to the date of
adoption. Under the modified-retrospective-transition method,
prior period financial statements will also be restated by
recognizing compensation cost as previously reported in the pro
forma disclosures under SFAS No. 123. The restatement
provisions can be applied to either a) all periods presented or b)
to the beginning of the fiscal year in which SFAS No. 123R is
adopted. As the Company previously adopted only the pro
forma disclosure provisions of SFAS No. 123, Safeway will
recognize compensation cost relating to the unvested portion of
awards granted prior to the date of adoption using the same
estimate of the grant-date fair value and the same attribution
method used to determine the pro forma disclosures under
SFAS No. 123.
SFAS No. 123R is effective at the beginning of the first
interim or annual period beginning after June 15, 2005, and
early adoption is encouraged. Safeway has elected to early
adopt this pronouncement beginning in the first quarter of
2005. The Company is in the process of evaluating the use
of certain option-pricing models as well as the assumptions
to be used in such models. When that evaluation is complete,
Safeway will select a transition method.