Bon-Ton Stores (BONT)

 

Effective January 29, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123R”). This statement replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and superseded Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). SFAS No. 123R requires that all share-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. SFAS No. 123R was adopted using the modified prospective method of application, which requires the Company to recognize compensation cost on a prospective basis. Under this method, the Company recorded share-based compensation expense for awards granted prior to, but not yet vested as of, January 28, 2006 using the fair value amounts determined for pro forma disclosures under SFAS No. 123. For share-based awards granted after January 28, 2006, the Company recognizes compensation expense based on estimated grant date fair value using the Black-Scholes option-pricing model.

 

The Company elected to adopt the shortcut method provided in Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” for determining the initial pool of excess tax benefits available to absorb tax deficiencies related to share-based compensation subsequent to the adoption of SFAS No. 123R. The shortcut method includes simplified procedures for establishing the beginning balance of the pool of excess tax benefits (the “APIC Tax Pool”) and for determining the subsequent effect on the APIC Tax Pool and the Company’s Consolidated Statements of Cash Flows of the tax effects of share-based compensation awards.

 

 

Effective January 29, 2006, the Company adopted
SFAS No. 123(R), “Share-Based Payment”
(“SFAS No. 123R”). This statement replaced
SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS No. 123”), and
superseded Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB
No. 25”). SFAS No. 123R requires that all
share-based compensation be recognized as an expense in the
financial statements and that such cost be measured at the fair
value of the award. SFAS No. 123R was adopted using
the modified prospective method of application, which requires
the Company to recognize compensation cost on a prospective
basis. Under this method, the Company recorded share-based
compensation expense for awards granted prior to, but not yet
vested as of, January 28, 2006 using the fair value amounts
determined for pro forma disclosures under
SFAS No. 123. For share-based awards granted after
January 28, 2006, the Company recognizes compensation
expense based on estimated grant date fair value using the
Black-Scholes option-pricing model.

 

The Company elected to adopt the shortcut method provided in
Staff Position No. FAS 123(R)-3, “Transition
Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards,” for determining the initial
pool of excess tax benefits available to absorb tax deficiencies
related to share-based compensation subsequent to the adoption
of SFAS No. 123R. The shortcut method includes
simplified procedures for establishing the beginning balance of
the pool of excess tax benefits (the “APIC Tax Pool”)
and for determining the subsequent effect on the APIC Tax Pool
and the Company’s Consolidated Statements of Cash Flows of
the tax effects of share-based compensation awards.

 

 

Prior to 2006, the Company applied the intrinsic value method as prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations, in accounting for stock options granted under the Company’s stock option plans. Under the intrinsic value method, no compensation cost is recognized if the exercise price of the Company’s stock options was equal to or greater than the market price of the underlying stock on the date of grant. Accordingly, no compensation cost was recognized in the accompanying consolidated statements of income prior to 2006 on stock options granted, since all options granted under the Company’s stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

 

Effective January 29, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123R”). This statement replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and supersedes APB No. 25. SFAS No. 123R requires that all share-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. SFAS No. 123R was adopted using the modified prospective method of application, which requires the Company to recognize compensation cost on a prospective basis. Therefore, prior years’ financial statements have not been restated. Under this method, the Company recorded share-based compensation expense for awards granted prior to, but not yet vested as of, January 28, 2006 using the fair value amounts determined for pro forma disclosures under SFAS No. 123. For share-based awards granted after January 28, 2006, the Company recognizes compensation expense based on estimated grant date fair value using the Black-Scholes option-pricing model.

 

The Company has elected to adopt the shortcut method provided in Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” for determining the initial pool of excess tax benefits available to absorb tax deficiencies related to share-based compensation subsequent to the adoption of SFAS No. 123R. The shortcut method includes simplified procedures for establishing the beginning balance of the pool of excess tax benefits (the “APIC Tax Pool”) and for determining the subsequent effect on the APIC Tax Pool and the Company’s Consolidated Statements of Cash Flows of the tax effects of share-based compensation awards.

 

Excess tax benefits related to share-based compensation in 2005 are reflected in operating activities. In a change from previous standards, SFAS No. 123R requires that excess tax benefits related to share-based compensation be reflected as financing cash inflows.