Recent accounting pronouncements

The Company reviews recent accounting pronouncements on a quarterly basis and has excluded discussion of those not applicable to the Company and those not expected to have a material impact on the Company’s financial statements. The following table provides a brief description of recent accounting pronouncements the Company has adopted or is currently evaluating.



Accounting Standards Update (ASU)	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards adopted
ASU 2014-09, Revenue from Contracts with Customers	This update superseded the revenue recognition guidance in ASC 605, Revenue Recognition. The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services.	February 4, 2018	The Company adopted this guidance and all related amendments using the modified retrospective method, and applied the standard to contracts that were not complete as of the adoption date. Comparative period information has not been restated and continues to be reported under the accounting standards in effect for those periods. This guidance primarily impacts the classification and timing of the recognition of the Company’s gift card breakage and timing of direct-to-consumer revenue. Adoption of this guidance had an immaterial impact on net income (loss) attributable to A&F in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The cumulative effect of applying the new standard on the Condensed Consolidated Balance Sheets as of November 3, 2018 was recognized as an adjustment to the opening balance of retained earnings, increasing beginning retained earnings by $6.9 million, with corresponding reductions in accrued expenses, inventories, and other assets of $4.7 million, $6.4 million, and $2.2 million, respectively, and increases to receivables and other current assets of $6.4 million and $4.4 million, respectively. In accordance with the new guidance, expected gift card breakage is now recognized in net sales as gift cards are redeemed. Previously, gift card breakage was recognized as other operating income when the Company determined that the likelihood of redemption was remote. Under the new guidance, direct-to-consumer revenue is recognized when control is passed to the customer, typically upon shipment or pick-up of goods. Previously, direct-to-consumer revenue was recognized upon customer acceptance, which typically occurred upon the customer’s possession of the merchandise. The Company does not expect this guidance to have a material impact on store, direct-to-consumer, wholesale, franchise or license revenues on an ongoing basis. The Company’s revenue recognition accounting policies are discussed further in this Note 1 under “Revenue Recognition.”
ASU 2016-18, Statement of Cash Flows	This update amends the guidance in ASC 230, Statement of Cash Flows. The new guidance requires an entity to show the changes in total cash, cash equivalents and restricted cash in the statement of cash flows. Consequently, an entity is no longer required to present transfers between cash and equivalents and restricted cash.	February 4, 2018	The Company adopted this guidance under the retrospective method. For the thirty-nine weeks ended October 28, 2017, adoption of this guidance resulted in a $1.6 million increase in net cash provided by operating activities and increases of $20.4 million and $22.1 million to beginning and ending cash, cash equivalents and restricted cash, respectively. In addition, captions have been updated in the Condensed Consolidated Statements of Cash Flows to reflect the inclusion of restricted cash. Restricted cash is classified as other assets on the Condensed Consolidated Balance Sheets, as was the case at year-end.
Standards not yet adopted
ASU 2016-02, Leases	This update supersedes the leasing guidance in ASC 840, Leases. The new guidance requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity.	February 3, 2019	The Company expects that this guidance will result in a material increase in the Company’s long-term assets and long-term liabilities on the Company’s Condensed Consolidated Balance Sheets for right-of-use assets and lease liabilities as the majority of the Company’s retail locations are currently categorized as operating leases. The Company plans to use the optional transition method when adopting the new standard and will be electing the practical expedient package. In addition, the Company is currently evaluating any additional impacts that this guidance may have on its consolidated financial statements, including the impairment of right-of-use assets. The Company expects this guidance will result in a material decrease in the Company’s opening retained earnings related to the pre-existing impairment of right-of-use assets. The Company did not elect to early adopt this guidance.
ASU 2017-12, Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities	This update amends ASC 815, Derivatives and Hedging. The new guidance simplifies certain aspects of hedge accounting to more accurately present the economic effects of an entity’s risk management activities in its financial statements. The new guidance allows more hedging strategies to be eligible for hedge accounting and aligns the recognition and presentation of the effects of hedging instruments and hedged items within the financial statements. For cash flow and net investment hedges, the guidance requires a modified retrospective approach while the amended presentation and disclosure guidance requires a prospective approach.	February 3, 2019	The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements. The Company did not elect to early adopt this guidance.