IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Oct. 31, 2020

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Note 2    Impact of New Accounting Pronouncements

Impact of Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The Company adopted the ASU in the first quarter of 2020 on a modified retrospective basis. Upon adoption, the Company recorded a cumulative-effect adjustment to retained earnings of $2.1 million, net of $0.4 million in deferred taxes. The Company recorded a provision for expected credit losses of $10.7 million during the thirty-nine weeks ended October 31, 2020, primarily as a result of the COVID-19 pandemic and deteriorating financial conditions at several of the Company’s wholesale customers.

The following table summarizes the activity in the Company’s allowance for expected credit losses during the thirty-nine weeks ended October 31, 2020:

($ thousands)
Balance at February 1, 2020	$	1,813
Adjustment upon adoption of ASU 2016-13		2,521
Provision for expected credit losses		10,663
Uncollectible accounts written off, net of recoveries		221
Balance at October 31, 2020	$	15,218

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies disclosure requirements on fair value measurements, removing and modifying certain disclosures, while adding other disclosures. The Company adopted the ASU during the first quarter of 2020, which did not have a material impact on the Company’s financial statement disclosures. Refer to Note 15 to the condensed consolidated financial statements for detail regarding the Company’s fair value measurements.

In March 2020, the SEC issued SEC Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, which is effective for filings on or after January 4, 2021, with early application permitted.  The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which required entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The rule permits entities to provide summarized financial information of the parent company and its issuers and guarantors on a combined basis in either a note to the financial statements or in management’s discussion and analysis. The Company adopted the rule during the second quarter of 2020 and elected to provide the summarized financial information in Management’s Discussion and Analysis of Financial Condition and Results of Operations.  In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, to reflect the new disclosure requirements in the FASB Accounting Standards Codification.

In April 2020, the FASB issued interpretive guidance indicating that entities may elect not to evaluate whether a concession provided by lessors is a lease modification. Under existing lease guidance, an entity would be required to determine if a lease concession was the result of a new arrangement reached with the landlord, which would be accounted for under the lease modification framework, or if the concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The FASB guidance provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. The Company has elected to treat lease concessions as variable rent. Accordingly, $1.7 million and $3.7 million in lease concessions for the thirteen and thirty-nine weeks ended, respectively, were recorded as

a reduction of rent expense within selling and administrative expenses in the condensed consolidated statements of earnings (loss). Refer to Note 9 to the condensed consolidated financial statements for further discussion regarding the Company’s leases.

Impact of Prospective Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20), Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance changes the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans, eliminating the requirements for certain disclosures that are no longer considered cost beneficial and requiring new disclosures that the FASB considers pertinent. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2018-14 is not expected to have a material impact on the Company’s financial statement disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to intraperiod tax allocation, simplifies certain elements of accounting for basis differences and deferred tax liabilities during a business combination, and standardizes the classification of franchise taxes. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s condensed consolidated financial statements.