GFSI » Topics » Recent Accounting Pronouncements

This excerpt taken from the GFSI 10-Q filed May 14, 2009.

2. Recent Accounting Pronouncements

 

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) generally retains the underlying concepts of SFAS 141 because it requires all business combinations to be accounted for at fair value under the acquisition method of accounting, but it changes how the acquisition method of accounting is applied in a number of significant aspects. Acquisition costs will be expensed as incurred; contingent consideration will be recorded at fair value on the date of acquisition; restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will affect the income tax provision. SFAS 141(R) is effective on a prospective basis for all of the Company’s business combinations with an acquisition date on or after January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. We adopted SFAS 141(R) and concluded it had no material impact on our consolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (an amendment of FASB Statement No. 133) (“SFAS 161”), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. We adopted SFAS 161, which became effective January 1, 2009, and the required disclosures have been included in Note 9. “Derivative”, to the consolidated financial statements.

 

In April 2008, the FASB issued Staff Position No. FAS 142-3, The Determination of the Useful Life of Intangible Assets (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The intent is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. We adopted FSP 142-3 and concluded it had no material impact on our consolidated financial statements.

 

In April 2009, the FASB issued Staff Position No. 107-1, Interim Disclosures About Fair Value of Financial Instruments (“FSP 107-1”).  FSP 107-1 extends the disclosure requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to interim financial statements of publicly traded companies.  FSP 107-1 requires disclosures of the fair value of all financial instruments, with the exception of a few, that must be presented together with the carrying value of the financial instruments in a manner that clearly distinguishes between assets and liabilities and indicates where the amounts are reported on the balance sheet.  It also requires disclosure on the methods and significant assumptions used to estimate fair value.  FSP 107-1 will be effective in our interim reporting for the three months ended June 30, 2009.  We do not anticipate this pronouncement to have a material effect on our consolidated financial statements.

 

8



These excerpts taken from the GFSI 10-K filed Mar 31, 2009.

Recent Accounting Pronouncements

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS 141(R)"), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) generally retains the underlying concepts of SFAS 141 because it requires all business combinations to be accounted for at fair value under the acquisition method of accounting, but it changes how the acquisition method of accounting is applied in a number of significant aspects. Acquisition costs will be expensed as incurred; contingent consideration will be recorded at fair value on the date of acquisition; restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will affect the income tax provision. SFAS 141(R) is effective on a prospective basis for all of the Company's business combinations with an acquisition date on or after January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. Early adoption is not permitted.

        In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 is effective for our Company as of January 1, 2009. SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires that ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented within equity, but separate from the parent's equity, in the consolidated statement of financial position. It also requires that consolidated net income be reported including the amounts attributable to both the parent and the noncontrolling interest and that the amounts of consolidated net income attributable to the parent and to the noncontrolling interest be disclosed on the face of the consolidated statement of income. Based on the Company's initial analysis, SFAS No. 160 will not have a material effect on its consolidated financial statements.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (as amendment of FASB Statement No. 133) ("SFAS 161"), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. SFAS 161 will become effective in 2009 and we are currently evaluating the impact of this standard on our consolidated financial statements.

        In April 2008, the FASB issued Staff Position No. FAS 142-3, The Determination of the Useful Life of Intangible Assets ("FAS 142-3"), which amends the factors that should be considered in developing renewal or extension assumptions used to determine useful life of a recognized intangible asset under FASB 142. The intent is to improve the consistency between the useful life of a recognized intangible asset under FASB 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the impact of this standard on our consolidated financial statements.

Recent Accounting Pronouncements



        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations
("SFAS 141(R)"), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) generally
retains the underlying concepts of SFAS 141 because it requires all business combinations to be accounted for at fair value under the acquisition method of accounting, but it changes how the
acquisition method of accounting is applied in a number of significant aspects. Acquisition costs will be expensed as incurred; contingent consideration will be recorded at fair value on the date of
acquisition; restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date will affect the income tax provision. SFAS 141(R) is effective on a prospective basis for all of the Company's business combinations with an acquisition
date on or after January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. Early adoption is not permitted.




        In
December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB
No. 51
("SFAS 160"). SFAS 160 is effective for our Company as of January 1, 2009. SFAS No. 160 amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires that ownership interests in subsidiaries held by parties other than the
parent be clearly identified, labeled, and presented within equity, but separate from the parent's equity, in the consolidated statement of financial position. It also requires that consolidated net
income be reported including the amounts attributable to both the parent and the noncontrolling interest and that the amounts of consolidated net income attributable to the parent and to the
noncontrolling interest be disclosed on the face of the consolidated statement of income. Based on the Company's initial analysis, SFAS No. 160 will not have a material effect on its
consolidated financial statements.



        In
March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities (as amendment of FASB Statement
No. 133)
("SFAS 161"), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. SFAS 161 will become effective in 2009 and we are currently evaluating the impact of
this standard on our consolidated financial statements.



        In
April 2008, the FASB issued Staff Position No. FAS 142-3,
The Determination of the Useful Life of Intangible Assets
("FAS 142-3"), which amends the factors that should be considered in developing renewal or extension assumptions used to determine useful life of a recognized intangible asset under
FASB 142. The intent is to improve the consistency between the useful life of a recognized intangible asset under FASB 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. FAS 142-3 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the impact of this standard on our consolidated financial statements.



Recent Accounting Pronouncements

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS 141(R)"), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) generally retains the underlying concepts of SFAS 141 because it requires all business combinations to be accounted for at fair value under the acquisition method of accounting, but it changes how the acquisition method of accounting is applied in a number of significant aspects. Acquisition costs will be expensed as incurred; contingent consideration will be recorded at fair value on the date of acquisition; restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will affect the income tax provision. SFAS 141(R) is effective on a prospective basis for all of the Company's business combinations with an acquisition date on or after January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. Early adoption is not permitted.

        In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 is effective for our Company as of January 1, 2009. SFAS No. 160 amends ARB 51 to establish accounting and reporting

F-17


Table of Contents


GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)


standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires that ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented within equity, but separate from the parent's equity, in the consolidated statement of financial position. It also requires that consolidated net income be reported including the amounts attributable to both the parent and the noncontrolling interest and that the amounts of consolidated net income attributable to the parent and to the noncontrolling interest be disclosed on the face of the consolidated statement of income. Based on the Company's initial analysis, SFAS No. 160 will not have a material effect on its consolidated financial statements.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (as amendment of FASB Statement No. 133) ("SFAS 161"), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. SFAS 161 will become effective in 2009 and we are currently evaluating the impact of this standard on our consolidated financial statements.

        In April 2008, the FASB issued Staff Position No. FAS 142-3, The Determination of the Useful Life of Intangible Assets ("FAS 142-3"), which amends the factors that should be considered in developing renewal or extension assumptions used to determine useful life of a recognized intangible asset under FASB 142. The intent is to improve the consistency between the useful life of a recognized intangible asset under FASB 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the impact of this standard on our consolidated financial statements.

Recent Accounting Pronouncements



        In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations
("SFAS 141(R)"), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) generally
retains the underlying concepts of SFAS 141 because it requires all business combinations to be accounted for at fair value under the acquisition method of accounting, but it changes how the
acquisition method of accounting is applied in a number of significant aspects. Acquisition costs will be expensed as incurred; contingent consideration will be recorded at fair value on the date of
acquisition; restructuring costs associated with a business combination will be expensed subsequent to the
acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will affect the income tax provision. SFAS 141(R) is effective
on a prospective basis for all of the Company's business combinations with an acquisition date on or after January 1, 2009, with the exception of the accounting for valuation allowances on
deferred taxes and acquired tax contingencies. Early adoption is not permitted.



        In
December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB
No. 51
("SFAS 160"). SFAS 160 is effective for our Company as of January 1, 2009. SFAS No. 160 amends ARB 51 to establish accounting and
reporting



F-17









HREF="#bg75901a_main_toc">Table of Contents





GOLDLEAF FINANCIAL SOLUTIONS, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)






standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It requires that ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented within equity, but separate from the parent's equity, in the consolidated statement of financial position. It also requires that consolidated net income be
reported including the amounts attributable to both the parent and the noncontrolling interest and that the amounts of consolidated net income attributable to the parent and to the noncontrolling
interest be disclosed on the face of the consolidated statement of income. Based on the Company's initial analysis, SFAS No. 160 will not have a material effect on its consolidated financial
statements.



        In
March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities (as amendment of FASB Statement
No. 133)
("SFAS 161"), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. SFAS 161 will become effective in 2009 and we are currently evaluating the impact of
this standard on our consolidated financial statements.



        In
April 2008, the FASB issued Staff Position No. FAS 142-3,
The Determination of the Useful Life of Intangible Assets
("FAS 142-3"), which amends the factors that should be considered in developing renewal or extension assumptions used to determine useful life of a recognized intangible asset under
FASB 142. The intent is to improve the consistency between the useful life of a recognized intangible asset under FASB 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141(R), and other U.S. generally accepted accounting principles. FAS 142-3 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the impact of this standard on our consolidated financial statements.



This excerpt taken from the GFSI 10-Q filed Nov 14, 2007.

Recent Accounting Pronouncements

       Income Taxes

     On January 1, 2007, the Company adopted the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN No. 48 requires a company to evaluate all uncertain tax positions and assess whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Adoption of FIN No. 48 resulted in an accrual of approximately $456,000 related to uncertain tax positions, which were previously accrued as contingent liabilities, thus there was no cumulative adjustment to retained earnings. This uncertain tax position, if recognized, would not have an effect on the effective tax rate.

     During the quarter ended June 30, 2007, a new uncertain tax position was identified. As a result, the Company recorded an additional $217,000 reserve relating to the new uncertain tax position, which has been incorporated into the Company’s overall effective annual tax rate in the accompanying consolidated statements of operations, resulting in an effective tax rate of 68.3%. The Company’s overall statutory rate at September 30, 2007 was 38.5% which was the rate applied to the deferred tax asset balances. In addition, during the quarter ended September 30, 2007, the Company resolved one of the uncertain tax positions and reversed the $137,000 reserve previously accrued as a contingent liability. Therefore, the Company’s accrual for uncertain tax positions totaled $536,000 at September 30, 2007. The Company has elected to classify interest associated with uncertain tax positions as interest expense in the accompanying consolidated statements of operations. Additionally, penalties associated with uncertain tax positions will be classified as income tax expense in the accompanying consolidated statements of operations. There were no penalties and interest accrued as of January 1, 2007. For the three and nine months ended September 30, 2007, interest expense for uncertain tax positions totaled $11,000 and $23,000, respectively.

18


     We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are no longer subject to U.S. federal tax examinations for any returns before 2004. State jurisdictions that remain subject to examination range from 2001 to 2006.

This excerpt taken from the GFSI 10-Q filed Aug 13, 2007.

Recent Accounting Pronouncements

          Income Taxes

     On January 1, 2007, we adopted the Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN No. 48 requires a company to evaluate all uncertain tax positions and assess whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Adoption of FIN No. 48 resulted in an accrual of approximately $456,000 related to uncertain tax positions, which were previously accrued as contingent liabilities, thus there was no cumulative adjustment to retained earnings. These uncertain tax positions, if recognized, would not have an effect on our effective tax rate.

18


     During the quarter ended June 30, 2007, a new uncertain tax position originated during the quarter. As a result, the Company recorded an additional $217,000 reserve relating to the new uncertain tax position, which has been incorporated into the Company’s overall annual tax rate in the accompanying consolidated statements of operations. Therefore, our accrual for uncertain tax positions totaled $673,000 at June 30, 2007. We have elected to classify interest associated with uncertain tax positions as interest expense in the accompanying consolidated statements of operations. Additionally, penalties associated with uncertain tax positions will be classified as income tax expense in the accompanying consolidated statements of operations. There were no penalties and interest accrued as of January 1, 2007. For the three and six months ended June 30, 2007, interest expense for uncertain tax positions totaled $13,000 and $13,000, respectively.

     We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are no longer subject to U.S. federal tax examinations for any returns before 2003. State jurisdictions that remain subject to examination range from 2000 to 2006.

This excerpt taken from the GFSI 10-Q filed May 15, 2007.
Recent Accounting Pronouncements

          Income Taxes

     On January 1, 2007, the Company adopted the Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN No. 48 requires a company to evaluate all uncertain tax positions and assess whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Adoption of FIN No. 48 resulted in an accrual of approximately $456,000 related to uncertain tax positions, which were previously accrued as contingent liabilities, thus there was no cumulative adjustment to retained earnings. These uncertain tax positions, if recognized, would not have an effect on the effective tax rate. We have elected to classify interest associated with uncertain tax positions as interest expense in the accompanying consolidated statements of operations. Additionally, penalties associated with uncertain tax positions will be classified as income tax expense in the accompanying consolidated statement of operations. There were no penalties and interest accrued as of January 1, 2007. 

     We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are no longer subject to U.S. federal tax examinations for any returns before 2003. State jurisdictions that remain subject to examination range from 2000 to 2006.

     On September 20, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). This new standard provided guidance for using fair value to measure assets and liabilities as required by other accounting standards. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 must be adopted by the Company effective January 1, 2008, although early application is permitted. We are currently evaluating the effects of SFAS No. 157 upon adoption, however at this time we do not believe that adoption of this standard will have a material affect on our operating results or consolidated financial position.

     In June 2006, Emerging Issues Task Force (“EITF”) No. 06-3 was issued to address the treatment of taxes collected by various governmental authorities related to revenue transactions. EITF No. 06-3 requires that all companies make an accounting policy decision as to whether such governmental taxes collected on revenue transactions are accounted for on a gross or net basis. For companies that elect to account for these taxes on a gross basis, then disclosure of the amount included in revenues for each period is required. EITF No. 06-3 is effective for periods beginning after December 15, 2006. We adopted this literature effective January 1, 2007 and have continued to account for all governmental taxes associated with revenue transactions on a net basis.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This statement is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the effects of SFAS No. 159 upon adoption, however at this time we do not believe that adoption of this standard will have a material affect on our operating results or consolidated financial position.

This excerpt taken from the GFSI 10-Q filed Mar 29, 2007.

Recent Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment, or SFAS No. 123R.  SFAS No. 123R replaces SFAS No. 123 and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123R became effective for us on January 1, 2006.  SFAS No. 123R requires us to recognize in our financial statements the cost of employee services received in exchange for equity instruments awarded or liabilities incurred.  We will measure compensation cost using a fair-value based method over the period that the employee provides service in exchange for the award.  We anticipate using the Black-Scholes option-pricing model to determine the annual compensation cost related to share-based payments under SFAS No. 123R.  SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current rules.  This requirement will reduce net operating cash flow and reduce net financing cash outflow by offsetting and equal amounts.

          As disclosed in Note 1 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005, based on the current assumptions and calculations used, had we recognized compensation expense based on the fair value of awards of equity instruments, net income would have increased by approximately $71,000 for the year ended December 31, 2005.  This compensation expense is the after-tax net effect of the stock-based compensation expense determined using the fair-value based method for all awards and stock-based employee compensation included previously in reported net income under APB Opinion No. 25. SFAS No. 123R will apply to all awards we grant or have granted after January 1, 2006 and to the unvested portion of our existing option awards, as well as modifications, repurchases, or cancellations of our existing awards.  We had estimated the impact of the adoption of SFAS No. 123R for the year ending December 31, 2006, based upon the options outstanding as of September 30, 2006, to result in an increase in compensation expense of approximately $700,000.  However, as a result of the completion of our secondary offering, the vesting of the majority of our outstanding stock options accelerated, which will result in additional stock compensation costs of $2.2 million in the fourth quarter of 2006.  The actual effect of adopting SFAS No. 123R will depend on future awards and actual option forfeitures, which are currently unknown. The effect of future awards will vary depending on factors that include the timing, amount and valuation methods used for those awards, and our past awards are not necessarily indicative of our future awards.

          In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes.  FIN No. 48 requires a company to evaluate all uncertain tax positions and determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

          The Company must adopt FIN No. 48 beginning January 1, 2007.  The Company is currently evaluating the requirements and impact, if any, of FIN No. 48 on its consolidated results of operations and financial position.

          In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of PriorYear Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”).  SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.

          Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatement.  These methods are referred to as the “roll-over” and “iron curtain” method.  The roll-over method quantifies the amount by which the current year income statement is misstated.  Exclusive reliance on an income statement approach can result in the accumulation of errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts.  The iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated.  Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued financial statements.  We currently use the roll-over method for quantifying identified financial statement misstatements.

33


          SAB 108 established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the company’s financial statements and the related financial statement disclosures.  This approach is commonly referred to as the “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods.

          SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used or by (2) recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings.  Use of this “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

          Our adoption of SAB 108 will not have any effect on our consolidated financial statements as we have not identified any prior year misstatements.

          On September 20, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”).  This new standard provides guidance for using fair value to measure assets and liabilities as required by other accounting standards.  Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which they reporting entity transacts.  SFAS No. 157 must be adopted by the Company effective January 1, 2008, although early application is permitted.  The Company is currently evaluating the effects of SFAS No. 157 upon adoption, however at this time it does not believe that adoption of this standard will have a material affect on its operating results or consolidated financial position.

This excerpt taken from the GFSI 10-K filed Mar 29, 2007.

Recent Accounting Pronouncements

          In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes.  FIN No. 48 requires a company to evaluate all uncertain tax positions and determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  The Company must adopt FIN No. 48 beginning January 1, 2007.  The Company is evaluating its tax positions in all open tax periods to assess whether any of those positions are uncertain and thus require a valuation allowance. 

F-15


          In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”).  SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.  SAB 108 is effective for fiscal years ending after November 15, 2006.

          Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatement.  These methods are referred to as the “roll-over” and “iron curtain” method.  The roll-over method quantifies the amount by which the current year income statement is misstated.  Exclusive reliance on an income statement approach can result in the accumulation of errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts.  The iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated.  Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued financial statements.  We currently use the roll-over method for quantifying identified financial statement misstatements.

          SAB 108 established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the Company’s financial statements and the related financial statement disclosures.  This approach is commonly referred to as the “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods.

          SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used or by (2) recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings.  Use of this “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

          Our adoption of SAB 108 did not have any effect on our consolidated financial statements.

          On September 20, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS no. 157”).  This new standard provided guidance for using fair value to measure assets and liabilities as required by other accounting standards.  Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which they reporting entity transacts.  SFAS No. 157 must be adopted by the Company effective January 1, 2008, although early application is permitted.  The Company is currently evaluating the effects of SFAS No. 157 upon adoption, however at this time it does not believe that adoption of this standard will have a material affect on its operating results or consolidated financial position.

          In June 2006, Emerging Issues Task Force (“EITF”) No. 06-3 was issued to address the treatment of taxes collected by various governmental authorities related to revenue transactions.  EITF No. 06-3 requires that all companies make an accounting policy decision as to whether such governmental taxes collected on revenue transactions are accounted for on a gross or net basis.  For companies that elect to account for these taxes on a gross basis, then disclosure of the amount included in revenues for each period is required.  EITF No. 06-3 is effective for periods beginning after December 15 2006.  The Company will adopt this rule effective January 1, 2007 and intends to account for all governmental taxes associated with revenue transactions on a net basis.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”).  SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value.  This statement is effective for fiscal years beginning after November 15, 2007.  The Company is currently evaluating the effects of SFAS No. 159 upon adoption, however at this time it does not believe that adoption of this standard will have a material affect on its operating results or consolidated financial position. 

This excerpt taken from the GFSI 10-Q filed Mar 29, 2007.

Recent Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment, or SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123 and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R became effective for us on January 1, 2006. SFAS No. 123R requires us to recognize in our financial statements the cost of employee services received in exchange for equity instruments awarded or liabilities incurred. We will measure compensation cost using a fair-value based method over the period that the employee provides service in exchange for the award. We anticipate using the Black-Scholes option-pricing model to determine the annual compensation cost related to share-based payments under SFAS No. 123R. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current rules. This requirement will reduce net operating cash flow and reduce net financing cash outflow by offsetting and equal amounts.

11


          As disclosed in Note 2 to our audited consolidated financial statements included in this quarterly report, based on the current assumptions and calculations used, had we recognized compensation expense based on the fair value of awards of equity instruments, net income would have increased by approximately $71,000 for the year ended December 31, 2005. This compensation expense is the after-tax net effect of the stock-based compensation expense determined using the fair-value based method for all awards and stock-based employee compensation included previously in reported net income under APB Opinion No. 25. SFAS No. 123R will apply to all awards we grant or have granted after January 1, 2006 and to the unvested portion of our existing option awards, as well as modifications, repurchases or cancellations of our existing awards. We estimate the impact of the adoption of SFAS No. 123R for the year ending December 31, 2006, based upon the options outstanding as of June 30, 2006, to result in an increase in compensation expense of approximately $700,000. The actual effect of adopting SFAS No. 123R will depend on future awards and actual option forfeitures, which are currently unknown. The effect of future awards will vary depending on factors that include the timing, amount and valuation methods used for those awards, and our past awards are not necessarily indicative of our future awards.

          In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN No. 48 requires a company to evaluate all uncertain tax positions and determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

          The Company must adopt FIN No. 48 beginning January 1, 2007. The Company is currently evaluating the requirements and impact, if any, of FIN No. 48 on its consolidated results of operations and financial position.

This excerpt taken from the GFSI 10-Q filed Mar 29, 2007.

Recent Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment, or SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123 and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R became effective for us on January 1, 2006. SFAS No. 123R requires us to recognize in our financial statements the cost of employee services received in exchange for equity instruments awarded or liabilities incurred. We will measure compensation cost using a fair-value based method over the period that the employee provides service in exchange for the award. We anticipate using the Black-Scholes option-pricing model to determine the annual compensation cost related to share-based payments under SFAS No. 123R. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current rules. This requirement will reduce net operating cash flow and reduce net financing cash outflow by offsetting and equal amounts.

          As disclosed in Note 2 to our audited consolidated financial statements included in this quarterly report, based on the current assumptions and calculations used, had we recognized compensation expense based on the fair value of awards of equity instruments, net income would have increased by approximately $71,000 for the year ended December 31, 2005. This compensation expense is the after-tax net effect of the stock-based compensation expense determined using the fair-value based method for all awards and stock-based employee compensation included previously in reported net income under APB Opinion No. 25. SFAS No. 123R will apply to all awards we grant or have granted after January 1, 2006 and to the unvested portion of our existing option awards, as well as modifications, repurchases or cancellations of our existing awards. We estimate the impact of the adoption of SFAS No. 123R for the year ending December 31, 2006, based upon the options outstanding as of March 31, 2006, to result in an increase in compensation expense of approximately $640,000. The actual effect of adopting SFAS No. 123R will depend on future awards and actual option forfeitures, which are currently unknown. The effect of future awards will vary depending on factors that include the timing, amount and valuation methods used for those awards, and our past awards are not necessarily indicative of our future awards.

12


This excerpt taken from the GFSI 10-Q filed Nov 13, 2006.

Recent Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment, or SFAS No. 123R.  SFAS No. 123R replaces SFAS No. 123 and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123R became effective for us on January 1, 2006.  SFAS No. 123R requires us to recognize in our financial statements the cost of employee services received in exchange for equity instruments awarded or liabilities incurred.  We will measure compensation cost using a fair-value based method over the period that the employee provides service in exchange for the award.  We anticipate using the Black-Scholes option-pricing model to determine the annual compensation cost related to share-based payments under SFAS No. 123R.  SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current rules.  This requirement will reduce net operating cash flow and reduce net financing cash outflow by offsetting and equal amounts.

          As disclosed in Note 1 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005, based on the current assumptions and calculations used, had we recognized compensation expense based on the fair value of awards of equity instruments, net income would have increased by approximately $71,000 for the year ended December 31, 2005.  This compensation expense is the after-tax net effect of the stock-based compensation expense determined using the fair-value based method for all awards and stock-based employee compensation included previously in reported net income under APB Opinion No. 25. SFAS No. 123R will apply to all awards we grant or have granted after January 1, 2006 and to the unvested portion of our existing option awards, as well as modifications, repurchases, or cancellations of our existing awards.  We had estimated the impact of the adoption of SFAS No. 123R for the year ending December 31, 2006, based upon the options outstanding as of September 30, 2006, to result in an increase in compensation expense of approximately $700,000.  However, as a result of the completion of our secondary offering, the vesting of the majority of our outstanding stock options accelerated, which will result in additional stock compensation costs of $2.2 million in the fourth quarter of 2006.  The actual effect of adopting SFAS No. 123R will depend on future awards and actual option forfeitures, which are currently unknown. The effect of future awards will vary depending on factors that include the timing, amount and valuation methods used for those awards, and our past awards are not necessarily indicative of our future awards.

          In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (“FIN No. 48”) Accounting for Uncertainty in Income Taxes, which is an interpretation of SFAS No. 109, Accounting for Income Taxes.  FIN No. 48 requires a company to evaluate all uncertain tax positions and determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

          The Company must adopt FIN No. 48 beginning January 1, 2007.  The Company is currently evaluating the requirements and impact, if any, of FIN No. 48 on its consolidated results of operations and financial position.

          In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of PriorYear Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”).  SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.

          Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatement.  These methods are referred to as the “roll-over” and “iron curtain” method.  The roll-over method quantifies the amount by which the current year income statement is misstated.  Exclusive reliance on an income statement approach can result in the accumulation of errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts.  The iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated.  Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued financial statements.  We currently use the roll-over method for quantifying identified financial statement misstatements.

32


          SAB 108 established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the company’s financial statements and the related financial statement disclosures.  This approach is commonly referred to as the “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods.

          SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used or by (2) recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings.  Use of this “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

          Our adoption of SAB 108 will not have any effect on our consolidated financial statements as we have not identified any prior year misstatements.

          On September 20, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”).  This new standard provides guidance for using fair value to measure assets and liabilities as required by other accounting standards.  Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which they reporting entity transacts.  SFAS No. 157 must be adopted by the Company effective January 1, 2008, although early application is permitted.  The Company is currently evaluating the effects of SFAS No. 157 upon adoption, however at this time it does not believe that adoption of this standard will have a material affect on its operating results or consolidated financial position.

This excerpt taken from the GFSI 10-K filed Mar 23, 2006.

Recent Accounting Pronouncements

          In December 2004, the FASB issued SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after December 15, 2005 and therefore the Company adopted SFAS 123R on January 1, 2006. SFAS No. 123R requires the cost of employee services received in exchange for equity instruments awarded or liabilities incurred to be recognized in the financial statements. Compensation cost will be measured using a fair-value based method over the period that the employee provides service in exchange for the award. The Company anticipates using the Black-Scholes option-pricing model to determine the annual compensation cost related to share-based payments under SFAS No. 123R.  SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current rules. This requirement will reduce net operating cash flow and reduce net financing cash outflow by offsetting and equal amounts.  As disclosed above, based on the current assumptions and calculations used, had the Company recognized compensation expense based on the fair value of awards of equity instruments, net income would have been increased by approximately $71,000 for the year ended December 31, 2005. This compensation expense is the after-tax net effect of the stock-based compensation expense determined using the fair-value based method for all awards and stock-based employee compensation included previously in reported net income under APB No. 25. SFAS No. 123R will apply to all awards granted after the effective date and to the unvested portion of existing awards, as well as, to modifications, repurchases or cancellations of existing awards. The impact of the adoption of SFAS No. 123R for the year ending December 31, 2006, based upon the options outstanding as of February 28, 2006, is estimated to result in an increase in compensation expense of approximately $800,000. The actual impact of adopting SFAS No. 123R will change for the effect of potential future awards and actual option forfeitures which are not known at this time.  The impact of those future awards will vary depending on the timing, amount and valuation methods used for such awards, and the Company’s past awards are not necessarily indicative of such potential future awards.

This excerpt taken from the GFSI DEF 14A filed Nov 17, 2005.

Recent Accounting Pronouncements

          On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.  Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123.  However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  Pro forma disclosure is no longer an alternative.

          The company must adopt SFAS No 123(R) no later than July 1, 2005.  Early adoption will be permitted in periods in which financial statements have not yet been issued.  We expect to adopt SFAS 123(R) on July 1, 2005.

          As permitted by SFAS No. 123, the company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options.  Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on our result of operations, although it will have no impact on our overall financial position.  The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.  However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income and earnings per share above.  SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.  This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption.  While the company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were not material to the company’s consolidated financial position or results of operations.

This excerpt taken from the GFSI 10-K filed Mar 18, 2005.

Recent Accounting Pronouncements

          On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

          The Company must adopt SFAS No 123(R) no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt SFAS 123(R) on July 1, 2005.

          As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of

F-10


pro forma net income and earnings per share above. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were not material to the Company’s consolidated financial position or results of operations.

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