BASIS OF PRESENTATION (Policies)

6 Months Ended

Jul. 02, 2016

BASIS OF PRESENTATION

NATURE OF OPERATIONS

NATURE OF OPERATIONS

Kate Spade & Company is engaged primarily in the design and marketing of a broad range of accessories and apparel. The Company’s fiscal year ends on the Saturday closest to December 31. The 2016 fiscal year, ending December 31, 2016, reflects a 52-week period, resulting in a 13-week, three-month period and a 26-week, six-month period for the second quarter. The 2015 fiscal year, ending January 2, 2016, reflects a 52-week period, resulting in a 13-week, three-month period and a 26-week, six-month period for the second quarter.

PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION

The Condensed Consolidated Financial Statements include the accounts of the Company. All inter-company balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

The Company’s critical accounting policies are those that are most important to the portrayal of its financial condition and results of operations in conformity with US GAAP. These critical accounting policies are applied in a consistent manner throughout all periods presented. The Company’s critical accounting policies are summarized in Note 1 of Notes to Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

The application of critical accounting policies requires that the Company make estimates and assumptions about future events and apply judgments that affect the reported amounts of revenues and expenses. Estimates by their nature are based on judgments and available information. Therefore, actual results could materially differ from those estimates under different assumptions and conditions. The Company continues to monitor the critical accounting policies to ensure proper application of current rules and regulations. During the second quarter of 2016, there were no significant changes in the critical accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

On January 3, 2016, the first day of the Company’s 2016 fiscal year, the Company retrospectively adopted new accounting guidance on debt issuance costs and reclassified the carrying value of its debt issuance costs related to term loans issued under its term loan credit agreement, which mature in April 2021 (collectively, the “Term Loan”) from an asset to a direct reduction of the liability. Accordingly, prior periods have been conformed to the current period’s presentation. As of July 2, 2016, January 2, 2016 and July 4, 2015, the aggregate carrying value of the debt issuance costs related to the Term Loan was $4.4 million, $4.8 million and $5.2 million, respectively. 

In November 2015, new accounting guidance on the balance sheet classification of deferred taxes was issued, which eliminates the current requirement to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. The guidance requires companies to classify all deferred tax assets and liabilities as noncurrent. This guidance is effective for interim and annual periods beginning on or after December 15, 2016, and early adoption is permitted. On July 3, 2016, the first day of the Company’s third fiscal quarter, the Company prospectively adopted this new accounting guidance. The Company will prospectively classify its existing deferred tax balances as noncurrent in future filings.