Sysco 2014 Annual Report Download - page 71

SYSCO CORPORATION-Form10-K 59
PARTII
ITEM8Financial Statements and Supplementary Data
Sysco recognizes a tax bene t from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the technical merits of the position. The amount recognized is measured as the largest
amount of tax bene t that has greater than a 50% likelihood of being realized upon settlement. To the extent interest and penalties may be assessed by
taxing authorities on any underpayment of income tax, estimated amounts required by the accounting guidance related to uncertain tax positions have
been accrued and are classi ed as a component of income taxes in the consolidated results of operations.
The determination of the company’s provision for income taxes requires signi cant judgment, the use of estimates and the interpretation and application
of complex tax laws. The company’s provision for income taxes primarily re ects a combination of income earned and taxed in the various U.S. federal
and state, as well as various foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax
items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the company’s change in the mix of earnings from these
taxing jurisdictions all affect the overall effective tax rate.
Acquisitions
Acquisitions of businesses are accounted for using the purchase method of accounting, and the  nancial statements include the results of the acquired
operations from the respective dates of acquisition.
The purchase price of the acquired entities is allocated to the net assets acquired and liabilities assumed based on the estimated fair value at the dates of
acquisition, with any excess of cost over the fair value of net assets acquired, including intangibles, recognized as goodwill. The balances included in the
consolidated balance sheets related to recent acquisitions are based upon preliminary information and are subject to change when  nal asset and liability
valuations are obtained. Subsequent changes to the preliminary balances are re ected retrospectively, if material. Material changes to the preliminary
allocations are not anticipated by management.
Reclassi cations
Prior year amounts within the consolidated balance sheets and consolidated cash  ows have been reclassi ed to conform to the current year presentation as
it relates to the presentation of certain accounts payable, accrued expenses, deferred taxes and other long-term liabilities balances within these statements.
Prior year amounts within the consolidated results of operations have been reclassi ed to conform to the current year presentation as it relates to the
classi cation of certain amounts within cost of sales and operating expenses within this statement. The impact of these reclassi cations was immaterial
to all periods presented.
NOTE2 Changes in Accounting
Testing Inde nite-Lived Intangible Assets for Impairment
In July 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-02, “Testing Inde nite-Lived Intangible
Assets for Impairment.” This update amends Accounting Standards Codi cation (ASC) 350, “Intangibles—Goodwill and Other” to allow entities an option
to  rst assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. Under that option, an entity no longer
would be required to calculate the fair value of the intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely
than not that its fair value is less than its carrying amount. The amendments in this update were effective for annual and interim impairment tests performed
for  scal years beginning after September 15, 2012, which was  scal 2014 for Sysco. The adoption of this update in the  rst quarter of  scal 2014 did not
result in a change to the company’s interim consideration of impairment of inde nite-lived intangible assets. This update did not have an impact on the
company’s annual testing for impairment of inde nite-lived intangibles in the fourth quarter of  scal 2014.
Reporting of Amounts Reclassi ed Out of Accumulated Other Comprehensive Income
In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassi ed Out of Accumulated Other Comprehensive Income.” This update
amends ASC 220, “Comprehensive Income” to require an entity to report the effect of signi cant reclassi cations out of accumulated other comprehensive
income on the respective line items in net earnings if the amount is being reclassi ed in its entirety to net earnings. For other amounts that are not being
reclassi ed in their entirety to net earnings, an entity is required to cross-reference other disclosures that provide additional detail about those amounts.
The amendments in this update were effective prospectively for  scal years, and interim periods within those years, beginning after December 15, 2012.
The additional disclosures required by this update are included in Note 17, “Comprehensive Income.”