Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...

Qualitative measures must be taken into account to fully evaluate the past accountingperformances and successes of Polo Ralph Lauren. These qualitative measures includekey accounting policies, potential accounting flexibility, strategy analysis, quality ofdisclosures, potential red flags, and undue accounting distortions.Key Accounting PoliciesIn order to measure the key success factors and risks pertained to Polo Ralph Lauren,it is necessary to evaluate the policies and estimates the firm uses. Critical accountingpolicies are those that are most important to the portrayal of the Company’s financialcondition and the results of operations and require management’s most difficult,subjective and complex judgments. The Company’s most critical accounting policiespertain to the following:Revenue RecognitionRevenue within the Company’s wholesale operations is recognized at the time titlepasses and risk of loss is transferred to customers. Wholesale revenue is recorded net ofreturns, discounts, allowances and operational chargeback’s. Discounts are based on tradeterms. Estimates for end-of-season allowances are based on historic trends, seasonalresults, an evaluation of current economic conditions and retailer performance.Income TaxesIncome taxes are accounted for under Statement of Financial Accounting Standards(“SFAS”) No. 109, “Accounting for Income Taxes.” In accordance with SFAS No. 109,deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existingassets and liabilities and their respective tax bases.14