Sysco 2009 Annual Report Download - page 47

The compensation cost related to these share-based awards is recognized over the requisite service period. The requisite service period is
generally the period during which an employee is required to provide service in exchange for the award.
The compensation cost related to stock issuances resulting from awards under the Management Incentive Plan through fiscal 2008 was
accrued over the fiscal year to which the incentive bonus related. The compensation cost related to stock issuances resulting from employee
purchases of stock under the Employees’ Stock Purchase Plan is recognized during the quarter in which the employee payroll withholdings are made.
Certain of our option awards are generally subject to graded vesting over a service period. In those cases, we will recognize compensation cost
on a straight-line basis over the requisite service period for the entire award. In other cases, certain of our option awards provide for graded vesting
over a service period but include a performance-based provision allowing for the vesting to accelerate. In these cases, if it is probable that the
performance condition will be met, we recognize compensation cost on a straight-line basis over the shorter performance period; otherwise, we
recognize compensation cost over the probable longer service period.
In addition, certain of our options provide that if the optionee retires at certain age and years of service thresholds, the options continue to vest
as if the optionee continued to be an employee or director. In these cases, for awards granted prior to July 2, 2005 (our adoption date for the fair
value recognition provisions in current stock compensation accounting standards), we will recognize the compensation cost for such awards over
the remaining service period and accelerate any remaining unrecognized compensation cost when the employee retires. For awards granted
subsequent to July 3, 2005, we will recognize compensation cost for such awards over the period from the date of grant to the date the employee
first becomes eligible to retire with his options continuing to vest after retirement.
Our option grants include options that qualify as incentive stock options for income tax purposes. In the period the compensation cost related to
incentive stock options is recorded, a corresponding tax benefit is not recorded as it is assumed that we will not receive a tax deduction related to
such incentive stock options. We may be eligible for tax deductions in subsequent periods to the extent that there is a disqualifying disposition of the
incentive stock option. In such cases, we would record a tax benefit related to the tax deduction in an amount not to exceed the corresponding
cumulative compensation cost recorded in the financial statements on the particular options multiplied by the statutory tax rate.
Accounting Changes
SFAS 165 Adoption
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” ( SFAS 165), which establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, the
standard sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This standard became effective for Sysco for its fiscal year ending June 27, 2009. We have included the
required disclosures for this standard in Note 1 to the Consolidated Financial Statements in Item 8.
SFAS 161 Adoption
As of the third quarter of fiscal 2009, SFAS No. 161, “Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133” (SFAS 161) became effective for Sysco. SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. The company has determined that no additional disclosures were necessary
upon adoption but will continue to assess the need for additional disclosures in future periods.
SFAS 157 Adoption
As of June 29, 2008, Sysco adopted the provisions of FASB Statement No. 157, “ Fair Value Measurements” (SFAS 157), for financial assets and
liabilities carried at fair value and non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. SFAS 157
establishes a common definition for fair value under generally accepted accounting principles, establishes a framework for measuring fair value and
expands disclosure requirements about such fair value measurements. The adoption of SFAS 157 for financial assets and liabilities carried at fair
value and non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not have a material impact on the
company’s financial statements. See also the discussion of FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157,” under New
Accounting Standards below.
FIN 48 Adoption
As of July 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB
Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS No. 109,
“Accounting for Income Taxes” (SFAS 109). FIN 48 clarifies the application of SFAS 109 by defining criteria that an individual tax position must meet
for any part of the benefit of that position to be recognized in the financial statements. Additionally, FIN 48 provides guidance on the measurement,
derecognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. As a result of this adoption,
we recognized, as a cumulative effect of change in accounting principle, a $91,635,000 decrease in our beginning retained earnings on our July 1,
2007 balance sheet.
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