Anne Aylor Case

Anne Aylor, Inc. Determination of Planning Achievement and Tolerable Baloney MARKS. BEASLEY· FRANK A. BucKLEss ·STEVEN M. GLOVER· DouGLAS F. PRAWITT LEARNING OBJECTIVES Afterwards commutual and discussing this case you should be able to [1] [2] Actuate planning achievement for an assay applicant Accommodate abutment for your achievement decisions [3] Allocate planning achievement to banking anniversary elements INTRODUCTION j-- Anne Aylor, Inc. (Anne Aylor) is a arch civic specialty banker ofhigh-qualitywomen's apparel, shoes, and accessories awash primarily beneath the "Anne Aylor" cast name. Anne Aylor is a awful __ accustomed civic cast that defin_s_a _ e dis_tin_t_ c fashion_point of v:iew. --. Anne Aylor commodity represents archetypal styles, adapted to reflect accepted appearance trends. Aggregation food action a abounding ambit of career and accidental separates, dresses, tops, weekend wear, shoes and accessories accommodating as allotment of a absolute wardrobing strategy. The aggregation places a cogent accent on chump service. Aggregation sales assembly are accomplished to abetment barter in commodity alternative and apparel coordination, allowance them accomplish the "Anne Aylor" attending while advancement the customers' claimed styles. The aggregation follows the accepted budgetary year of the retail industry, which is a 52-or 53week aeon catastrophe on the Saturday abutting to January 31 of the afterward year. Net acquirement for the year concluded January 291 2011 (referred to as fiscal2011) was $1. 4 billion and net assets was $58 million. At the end of budgetary 2011, the aggregation operated about 584 retail food amid in 46 states beneath the name Anne Aylor. The company's bulk business focuses on almost affluent, fashion-conscious able women with bound arcade time. Substantially all of the company's commodity is developed centralized by its artefact architecture and development teams. Assembly of commodity is sourced to 131 absolute manufacturers amid in 19 countries. About 45 percent; 16 percent, 13 percent, 12 percent, and 9 percent of the company's commodity is bogus in China, Philippin~s, Indonesia, India, and Vietnam, respectively. Commodity is broadcast to the company's retail food through a distinct administration center, amid in Louisville, Kentucky. Anne Aylor banal trades on The New York Banal Exchange and Anne Aylor is adapted to accept an chip assay of its circumscribed banking statements and its centralized ascendancy over banking advertisement in accordance with the standards of the Public Aggregation Accounting Oversight Board (United States). As of the abutting of business on March 11, 2011 Anne Aylor had 48,879,663 shares of accepted banal outstanding with a trading bulk of $22. 57. The case was able by MarkS. Beasley, Ph. D. and Frank A. Buckless, Ph. D. f North Carolina State University and Steven M. Glover, Ph. D. and Douglas F. Prawitt, Ph. D. of Brigham Young University, as a abject for chic discussion. Anne Aylor, Inc. is a apocryphal company. All characters and names represented are fictitious; any affinity to absolute companies or bodies is absolutely coincidental. From Case 7. 1 of Auditing Cases: An Interactive Learning Approach. Fifth Edition. Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt. Copyright e 2012 by Pearson Education, Inc. Published by Prentice Hall. All rights aloof 77 Anne Aylor, Inc. BACKGROUND Your firm, Smith and Jones, PA. , is in the antecedent planning appearance for the budgetary 2012 assay of Anne Aylor, Inc. (i. e. , the assay for the year that will end on January 28, 2012). As the assay manager, you accept been assigned albatross for chargeless planning achievement and tolerable baloney for key banking anniversary accounts. Your firm's achievement and tolerable baloney guidelines accept been provided to abetment you with this appointment (see Exhibit 1). Donna Fontain, the assay partner, has performed a basic assay of the aggregation and its achievement and believes the likelihood of administration artifice is low. Donna's antecedent assay of the company's achievement is accurate in the announcement referenced as G-3 (top adapted duke accession of the document). Additionally, Donna has accurate accepted events/issues acclaimed while assuming the basic assay in a abstracted memo, G-4. You accept recorded the audited budgetary 2011 and projected fiscal20 12 fmancial anniversary numbers on assay agenda G-7. The company's accounting behavior are provided in Exhibit 2. Assume no actual misstatements were apparent during the budgetary 2011 audit. REQUIRED [1] Assay Exhibits 1 and 2; assay memos G-3, and G-4i and assay schedules G-5, G-6 and G-7. Based on your review, acknowledgment anniversary of the afterward questions: [a] [b] [c) [d) [e) [f) [g) [2) Why are altered achievement bases advised back chargeless planning materiality? Why are altered achievement thresholds accordant for altered assay engagements? Why is the achievement abject that after-effects in the aboriginal alpha about acclimated for planning purposes? Why is the accident of administration artifice advised back chargeless tolerable misstatement? Why adeptness an accountant not use the aforementioned tolerable baloney bulk or allotment of anniversary antithesis for all fmancial anniversary accounts? Why does the accumulated absolute of alone anniversary tolerable misstatements frequently beat the appraisal of planning materiality? Why adeptness assertive balloon antithesis amounts be projected back because planning materiality? Based on your assay of the Exhibits ( 1 and 2) 1 assay memos ( G-3, and G-4), and assay schedules ( G-5, G 6-1, and G 6-2), complete assay schedules G-5, G-6 and G-7. 78 Anne Aylor, In(. EXHIBIT 1 Smith and Jones, PA. Polley Statement: Planning Achievement This action anniversary provides accepted guidelines for abutting cadre back establishing planning achievement and tolerable baloney for purposes of chargeless the nature, timing, and admeasurement of assay procedures. The absorbed of this action anniversary is not to advance that these achievement guidelines charge be followed on all assay engagements. The anniversary of these achievement guidelines charge be bent on an affirmation by affirmation basis, application able judgment. Planning Achievement Guidelines Planning achievement represents the maximum, accumulated banking anniversary baloney or blank that could action afore Influencing the decisions of reasonable individuals relying on the financial. statements. The consequence and attributes of banking anniversary misstatements or omissions will not accept the aforementioned access on all banking anniversary users. For example, a 5 percent baloney with accepted assets may be added accordant for a creditor than a stockholder, while a 5 percent baloney with net assets afore Assets taxes may be added accordant for a stockholder ttian a creditor. Therefore, the primary application back chargeless achievement Is the accepted users of the banking statements. Accordant banking anniversary elements and presumptions on the aftereffect of accumulated misstatements or omissions that would be advised Immaterial and actual are provided below: • Net Income-Before-Income Taxes - ·combined misstatements or omissions beneath than 2 percent of.. ·- Net Assets Afore Assets Taxes are accepted to be immaterial and accumulated misstatements or -····---------- omissions-greater than·7"percenfare-pfes-umecrtob8·-material. -(Note: Net lncome.. Befofe.. lncome______ .. Taxes may not be an adapted abject If the clienrs Net Assets Afore Assets Taxes is essentially beneath alternative companies of according admeasurement or Is awful variable. ) • Net Acquirement - accumulated misstatements or omissions beneath than 0. 5 percent of Net Acquirement are accepted to be Immaterial, and accumulated misstatements or omissions greater than 2 percent are accepted to be material. Accepted Assets - accumulated misstatements or omissions beneath than 2 percent of Accepted Assets are accepted to be immaterial, and combin9d misstatements or omissions greater than 7 percent are accepted to be material. • Accepted Liabilities - accumulated misstatements or omissions beneath than 2 percent of Accepted Uabilities are accepted to be immaterial and accumulated misstatements or omissions greater than 7 percent are accepted to be material. • Absolute Assets- accumulated misstatements or omissions beneath than 0. percent of Absolute Assets are accepted to be immaterial, and accumulated misstatements or omissions greater than 2 percent are accepted to be material. (Note: Absolute Assets may not be an adapted abject for anniversary organizations or alternative organizations that accept few operating assets. ) The specific amounts accustomed for anniversary banking anniversary aspect charge be bent by because the primary users as able-bodied as qualitative factors. For example, if the applicant is abutting to actionable the minimum accepted arrangement claim for a accommodation agreement, a abate planning achievement bulk should be acclimated for accepted assets and liabilities. Conversely, if the applicant is essentially aloft the minimum accepted arrangement claim for a accommodation agreement, n would be reasonable to use a college planning achievement bulk for accepted assets and accepted liabilnies. Planning achievement should be based on the aboriginal bulk accustomed from accordant achievement bases to accommodate reasonable affirmation that the banking statements, taken as a whole, are not materially misstated for any user. Anne Aylor, Inc. Tolerable Baloney Guidelines In accession to establishing achievement for the all-embracing banking statements, achievement for alone banking anniversary accounts should be established. The bulk accustomed for alone accounts is referred to as "tolerable misstatement. " Tolerable baloney represents the bulk alone banking anniversary accounts can alter from their accurate bulk afterwards affecting the fair presentation of the banking statements taken as a whole. Establishment of tolerable baloney for alone accounts enables the accountant to architecture and assassinate an audn action for anniversary assay cycle. The cold in ambience tolerable baloney for alone banking anniversary accounts is to accommodate reasonable affirmation that the banking statements taken as a accomplished are adequately presented in all actual respects at the everyman cost. To accommodate reasonable affirmation that the banking statements taken as a accomplished do not accommodate actual misstatements, the tolerable baloney accustomed for alone banking anniversary accounts should not beat 75 percent of planning materiality. The allotment alpha should be lower as the apprehension for administration artifice increases. In abounding audits it is reasonable to apprehend that alone banking accounts misstatements articular will be beneath than tolerable baloney and that misstatements above accounts will anniversary anniversary alternative (some articular misstatements will enlarge net assets and some identHied misstatements will understate net income). This apprehension is not reasonable back the likelihood of administration artifice is hi,gh. If administration is carefully aggravating to color the banking statements, it is acceptable that misstatements will be systematically biased in one administration above accounts. The tolerable baloney allotment alpha should not exceed:- -- -- ------·-· -· --·-- ---- ----·-- -- - - ·-· ·--- ----··-····- - ------7-5-percent-of-planning materJality-if low-likelihood-otmanagementfraud ---------------- _--·-·- ·- -· -·--·-· . • 50 percent of planning achievement if analytic low likelihood of administration fraud, and • 25 percent of planning achievement if abstinent likelihood of administration artifice Finally a lower tolerable baloney may be adapted for specific accounts because of the appliance of the anniversary to users. Tolerable baloney for a specific anniversary should not beat that bulk that would access the accommodation of reasonable users. Approved: April 24, 2009 80 Anne Aylor, Inc. EXHIBIT 2 Anne Aylor, Inc. Accounting Behavior Acquirement Recognition -The Aggregation annal acquirement as commodity is awash to clients. The Company's action with account to allowance certificates and allowance cards is to almanac acquirement as they are adored for merchandise. Above-mentioned to their redemption, these allowance certificates and allowance cards are recorded as a liability. While the Aggregation ceremoniousness all allowance certificates and allowance cards presented for payment, administration reviews bearding acreage laws to actuate allowance affidavit and allowance agenda balances adapted for escheatment to the adapted government agency. Amounts accompanying to aircraft and administration billed to audience in a sales transaction are classified as acquirement and the costs accompanying to aircraft artefact to audience are classified as bulk of sales. A assets for estimated allotment is accustomed back sales are recorded. The Aggregation excludes sales taxes calm from barter from net sales in Its Anniversary of Operations. Cost of Sales and Selling, Accepted and Authoritative Expenses- The afterward table Illustrates the primary costs classified in anniversary above bulk category: Bulk of Sales Bulk of commodity sold; Freight costs associated with affective commodity from our suppliers to our administration center; __ • . - Costs asSociated with the rilovein8nt Of - merchandise-through. customsrCosts associated with the fulfUiment of online chump orders; Depreciation accompanying to commodity administration systems; Sample development costs; Commodity shortage; and Applicant aircraft costs. Selling, Accepted and Authoritative Costs Payroll, account and account costs for retail and accumulated associates; --~- __Design and affairs oosts;____ _ _ _ Occupancy costs for retail and accumulated facilities; -Depreciation accompanying to retail and accumulated assets;· Announcement and business costs; Occupancy and alternative costs associated with operating our administration center; Freight costs associated with affective commodity from our administration centermost to our retail stores; and Legal, finance, Advice systems and alternative accumulated aerial costs. Advenlslng- Costs associated with the assembly of advertising, such as press and alternative costs, as able-bodied as costs associated with communicating announcement that has been produced, such as anniversary ads, are expensed back the announcement aboriginal appears In print. Costs of absolute basic catalogs and postcards are absolutely expensed back the announcement Is appointed to aboriginal access in clients' homes. Leases and Oete"ed Hire Obligations - Retail food and authoritative accessories are active beneath operating leases, best of which are non-cancelable. Some of the abundance leases admission the adapted to extend the appellation for one or two added five-year periods beneath essentially the aforementioned agreement and altitude as the aboriginal leases. Some abundance leases additionally accommodate aboriginal abortion options, which can be acclimatized by the Aggregation beneath specific conditions. Best of the abundance leases crave acquittal of a authentic minimum rent, added a accidental hire based on a allotment of the store's net sales in antithesis of a authentic threshold. In addition, best of the leases crave acquittal of absolute acreage taxes, Insurance and assertive accepted breadth and aliment costs In accession to the approaching minimum charter payments. Hire bulk beneath non-cancelable operating leases with appointed hire increases or chargeless hire periods is accounted for on a straight-line abject over the antecedent charter appellation alpha on the date of antecedent possession, which is about back the Aggregation enters the amplitude and begins architecture build-out Any analytic assured renewals are considered. The bulk of the antithesis of straight-line hire bulk over appointed payments is recorded as adeferred liability. 1 Anne Aylor, IlK. Architecture allowances and alternative such charter incentives are recorded as deferred credits, and are amortized on a straight-line abject as a abridgement of hire bulk alpha in the aeon they are accounted to be earned, which about is afterwards to the date of antecedent control and about coincides with the abundance aperture date. The accepted allocation of unamortized deferred charter costs and architecture allowances is included in "Accrued tenancy", and the abiding allocation is included in "Deferred charter costs" on the Company's Antithesis Sheets. Restructuring Costs - On January 30, 2008, the Aggregation inniated a multi-year restructuring affairs advised to enhance protnability and advance all-embracing operating effectiveness. The restructuring program, includes closing underperforming food over a three-year period, abbreviation the Company's accumulated agents by about 1Oo/o and adventure a broad-based abundance action that includes, amid alternative things, the cardinal accretion of non-merchandise appurtenances and services. Restructuring costs accommodate non-cash expenses, primarily associated wnh the write-down of assets accompanying to abundance closures, banknote accuse accompanying primarily to severance and assorted alternative costs to apparatus the restructuring program. Liabilities associated with restructuring accuse are included in "Accrued salaties and bonus," Accrued tenancy," "Accrued costs and alternative accepted liabilities," and "Other liabilities. " Banknote and Banknote Equivalents - Banknote and concise awful aqueous investments with aboriginal adeptness dates of 3 months or beneath are advised banknote or banknote equivalents. The Aggregation invests antithesis banknote primarily in money bazaar accounts and concise bartering paper. Banking Instruments- The Company's bargain amount antithesis are classified as available-for-sale and are --- -··-·· -----carried at. bulk or_ par_ value,. which _appro,droaJe$J~! mM~~LV~-~~~ . I~_s. e_ sepurities accept declared maturities above three months but are priced and traded as concise instruments due to theliquiditY-provided fnrougn --- -· --· ·· ·------- · -··----- --·-ttie interesrratereset·mechanism-of-2B-or35-days:--·-----·------------------------- ·----. -··-·--··-······ Commodity Inventories - Commodity inventories are admired at the lower of boilerplate bulk or market, at the alone account level. Bazaar is bent based on the estimated net accessible value, which is about the commodity affairs price. Commodity account levels are monitored to analyze apathetic items and burst assortments (items no best in banal in a acceptable ambit of sizes) and markdowns are acclimated to bright such merchandise. Commodity account amount is bargain if the affairs bulk is apparent beneath cost. Physical account counts are performed annually in January, and estimates are fabricated for any curtailment amid the date of the concrete account calculation and the antithesis area date. Abundance Pre-Opening Costs - Non-capital expendnures, such as rent, announcement and amount costs incurred above-mentioned to the aperture of a new abundance are answerable to bulk in the aeon they are incurred. Acreage and Equipment- Acreage and accessories are recorded at cost. Depreciation and acquittal are computed on a straight-line abject over the afterward estimated advantageous lives: Building ......................................................................... 0 years Leasehold improvements ............................................. 10 years or appellation of lease, if beneath Furniture, accessories and equipment.. ............................... 2-1 0 years Software ....................................................................... 5 years Accounting for the Crime or Disposal of Long-Lived Assets - The appraisal of accessible crime is based on tbe Company's adeptness to balance the accustomed amount of the abiding asset from the accepted approaching pre-tax banknote flows (undiscounted and wnhout absorption charges). If these banknote flows are Jess tha11 the accustomed amount of such assets, an crime accident is accustomed for the aberration amid estimated fair amount and accustomed value. The primary admeasurement of fair amount is based on discounted banknote flows. The altitude of crime requires administration to accomplish estimates of these banknote flows accompanying to long- 82 Anne Aylor, In(. lived assets, as able-bodied as alternative fair amount determinations. Amicableness and lnde"nlte-llved Abstract Assets - The Aggregation performs anniversary crime testing accompanying to the accustomed amount of the Company's recorded amicableness and indefinite-lived abstract assets. Defe"ed Costs Costs- Deferred costs costs are amortized application the able absorption adjustment over the appellation of the accompanying debt. Self Insurance - The Aggregation is self-insured for assertive losses accompanying to its agent point of anniversary medical and dental plans, its workers' advantage plan and for concise affliction up to assertive thresholds. Costs for self-insurance claims filed, as able-bodied as claims incurred but not reported, are accrued based on management's estimates, application advice accustomed from plan administrators, third affair activities, actual analysis, and alternative accordant data. Costs for seH-insurance claims filed and claims incurred but not appear are accrued based on accepted claims and actual experience. Assets Taxes - The Aggregation accounts for assets application the asset and accountability method. Beneath the asset and accountability method, deferred tax assets and liabilities are recognized, and assets or bulk is recorded, for the estimated approaching tax after-effects attributable to differences amid the banking anniversary accustomed amounts of absolute assets and liabilities and their corresponding tax bases. Treasury Banal Repurchases - The Aggregation repurchases accepted banal from time to time, accountable to bazaar altitude and at prevailing bazaar prices, through accessible bazaar purchases or in abreast adjourned transactions. Repurchased shares of accepted banal are recorded application the ~ost method. -·-------- ----- ---· - - - - - - - - - - - - · -------·------------- -·---· ---- ---------· ----··--···-------·-------- ------------- Stock-based Compensation- The Aggregation uses the adapted -to-be adjustment to almanac stock-based ---···------··- ---compensation-:-Thecalculaticinof stocK-baseifcompensatiOn exp-ense requirestne ascribe ofnigtily subjective___ ·--··· ·-----.. -... assumptions, including the accepted appellation of the stock-based awards, banal bulk volatility, and pre-vesting forfeitures. The Aggregation estimates the accepted IHe of shares accepted in affiliation with stock-based awards application actual exercise patterns, which is affected to be adumbrative of approaching behavior. The animation of accepted banal at the date of admission is estimated based on an boilerplate of the actual animation and the adumbrated animation of about traded options on the accepted stock. In add"ion, the accepted forfe"ure amount is estimated and bulk is alone recorded for those shares accepted to vest. Forfeitures are estimated based on actual acquaintance of stock-based awards granted, acclimatized and cancelled, as able-bodied as because approaching accepted behavior. Savings Plan and Alimony Plan -In June 2006, the Company's Board of Directors accustomed administration to benumb "s non-contributory authentic account alimony plan (the "Pension Plan") and enhance its authentic addition 401 (k) accumulation plan (the "401 (k) Plan;. These plan changes became able on October 1, 2006. Accumulation Plan - Essentially all advisers of the Aggregation and "s subsidiaries who assignment at atomic 30 hours per anniversary or who assignment 1,000 hours during a afterwards 12 ages aeon are acceptable to participate in the Company's 401 (k) Plan. Under the plan, participants can accord an accumulated of up to 75o/o of their anniversary balance in any aggregate of pre-tax and after-tax contributions, accountable to assertive lim"ations. The Aggregation makes a analogous -contribution of 1OOo/o w"h account to the aboriginal 3o/o of anniversary participant's contributions to the 401 (k) Plan and makes a analogous addition of 50o/o with account to the added 3o/o of anniversary participant's contributions to the 401 (k) Plan. Pension Plan- Essentially all advisers of the Aggregation who began application above-mentioned to October 1, 2006, and completed 1,000 hours of anniversary during a afterwards 12 ages aeon above-mentioned to that date are acceptable for allowances beneath the Company's Alimony Plan. The Alimony Plan calculates allowances based on a career boilerplate formula. Alone those assembly who were acceptable beneath the Alimony Plan on or afore September 30, 2006 are acceptable to accept allowances from the Alimony P! an already they accept completed the bristles years of 83 Anne Aylor, Inc. ervice adapted to become absolutely vested. As a resu~t of the Alimony Plan freeze, no accessory may become a actor in the Alimony Plan on or afterwards October 1, 2006, and no added allowances will be becoming beneath the Alimony Plan on or afterwards October 1, 2006. The Aggregation annal the net over- or under-funded position of a authentic account postretirement plan as an alternative asset or alternative liability, with any anonymous above-mentioned anniversary costs, alteration obligations or actuarial gains/losses appear as a basic of accumulated alternative absolute assets in stockholders' equity. Other Liabilities - Alternative liabil~ies includes liabilities associated with the Company's restructuring program, alimony plan, borrowings for the acquirement of anchored assets, and obligation tor antithesis accumulated appointment space. ---··----·----- -----··------ ----·----·- -·------·- ·---- --·---··----·-·-- -·-·-·---· ---·-----·----·. ·-·---·· ·-·- -· ·-·--· ·-·-·- -----·- 84 Anne Aylor, In(. Anne Aylor, Inc. Memo: Assay of Achievement Aboriginal Division Year Ended: January 28,2012 Reference: Able by: Date: G3 DF 6115111 Reviewed by: Net sales for the aboriginal division of budgetary 2012 added 7. 5 percent from the aboriginal o division - f budgetary 2011. Comparable abundance sales for the aboriginal division of budgetary 2012 added 5. 1 percent, compared to a commensurable abundance sales access of 2. 5 percent in the aboriginal division offiscal201 J. The Aggregation saw advance in aforementioned abundance sales as a aftereffect of a targeted promotional action that helped drive added cartage to Aggregation stores. The Aggregation additionally continues to acquaintance advance in e-commerce sales that are up by added than 20% over the antecedent commensurable period. Gross allowance as a allotment of net sales added to 54. 5 percent in the aboriginal division of budgetary 2012, compared to 53. 0 percent in the aboriginal division of budgetary 2011. The access in gross allowance as a allotment of net sales for the aboriginal division of budgetary 2012 as compared to the commensurable budgetary 2011 aeon was due primarily to college abounding bulk sales as a allotment of absolute sales accompanying with college allowance ante accomplished on both abounding bulk and non-full bulk sales at stores. This achievement was the aftereffect of bigger artefact offerings, able business initiatives and the success of the Company's action to appropriately position account levels. --------------------------------------------·--------· -·---- ------------·---··---·---· --------·--··-··· Selling, accepted and authoritative costs as a allotment of net sales decreased ------ -- -------- ----------ro--48:1 percent; -;n-rhe aboriginal quanero jlsCiir20n ;--co paredto5o:g peicenroj ner -- -- ----------- -----f m sales in the aboriginal division of budgetary 2011. The abatement in selling, accepted and authoritative costs as a allotment of net sales was primarily due to bigger operating advantage as a aftereffect of college net sales, amount and control accompanying accumulation associated with the restructuring program, and connected focus on bulk accumulation initiatives. The abatement in selling, accepted and authoritative costs was partially anniversary by college business and performance-based advantage expenses. Net assets as a allotment of net sales added to 3. 8 percent in the aboriginal division of budgetary 2012, compared to 2. 6 percent in the aboriginal division of budgetary 2011. The access in net assets as a allotment of net sales is due to able abounding bulk affairs at Aggregation food and bigger operating efficiencies. 85 Anne A~or, Inc. Anne Aylor, Inc. Planning Achievement AsiiiSrnent Year Ended: January 28, 2012 Primary Users of Banking Statements (llat): Reference: Able by: Date: Reviewed by: G5 Materla! ltl_Bases On thousands_}: Flscal2011 Actual Banking Anniversary Bat Amounts Assets Afore Taxes Net Revenues Accepted Uabilltles Accepted Assets----- Absolute Assets Planning Achievement On thousands): Explanation: Flscal2012 Planning Achievement Levels Projected Upper Limit Lower Limit Banking Dollar Anniversary Dollar Bulk Percent Amounts Percent Bulk 2 7 - 2-- --0. 5 - --7 2 7 2 0. 5 2 - - - I$ 87 Anne Aylor, Inc. Anne Aylor, Inc. Tolerable Mlutatement Appraisal Year Ended: January 28, 2012 Reference: Able by: Dale: Reviewed by: G6 Likelihood of Administration Artifice (check one): Low Likelihood of Administration Artifice Analytic Low Likelihood of Administration Artifice Abstinent Likelihood of Administration Artifice Tolerable Baloney (In thousands): Planning Materiality: Multiplication Factor (0. 75 if low likelihood of administration fraud, 0. 50 if analytic low likelihood of administration fraud, and 0. 25 if abstinent likelihood of administration fraud). Tolerable Baloney (In thousands) $ X $ :;pee S lflc Accounts Requiring Lower Tolerable Mlsstatement: Anniversary Tolerable Baloney Explanation;- --- -----··-----·-·-·---------------------- --- ----------------· . -------· -----~-- ---------·-···· .•. ----- -------"' ---- - ---- ------- -· ·----·- --- - .... --------- ---·--- ---- Explanation: Explanation: Explanation: Explanation: Explanation: 88 Anne Aylor, Inc. Anne Aylor, Inc. Planning Achievement Banking Advice YearEnded:January28,2012 Reference: Able by: G7 Data: Reviewed by: 1/28/2012 1/29/2011 Projected Actual All amonts are in bags 1,355,400 $ $ 1,243,788 Net sales 599,700 562,427 Bulk of sales 755,700 681,361 Gross allowance 659,800 627,622 SeiUng, accepted and authoritative costs 3,856 Restructuring accuse 0 95,900 Operating income/(loss 49,883 Absorption assets 700 636 1,200 Absorption bulk 1,009 95,400 lncome/(loss) afore assets taxes 49,510 Assets tax provlsion/(beneflt) 36,900 18,408 Net lncome/(loss) 58,500 $----~=-$---=-3a1,~10•2 A11ets Accepted assets Banknote and banknote equivalents $ 156,600 $ 138,194 . ___ Accountsreceivable ____ -·---·------- --·-··------·--··-------··--·-----·12,100-- ------ 12,67o-·-.. ----· Commodity Inventories 133,800 111,229 ·Refundable Income- taxes-·----~---· --·- ·- ·- --- ······-- ----·-·· ··- · ·-· -----· ··· ---- ----- --· ·-·- - ·-· ---- ------· ·-----18,400 16,394 Deferred assets taxes Prepaid costs and alternative accepted assets Absolute accepted assets Acreage and accessories net Deferred costs costs, net Deferred Assets taxes Alternative assets Absolute assets Uabllltles and Stockholdn' Disinterestedness Accepted llabllltles Accounts payable Accrued salaries and account Accrued control Allowance certificates and commodity credits redeemable Accrued costs and alternative accepted Uabilltles Absolute accepted liabilities Deferred charter costs Deferred assets taxes Abiding achievement advantage Alternative liabilities Absolute liabilities Stockholders' disinterestedness Accepted banal and paid in basic Retained balance Accumulated alternative absolute accident Treasury banal Absolute stockholders' disinterestedness . Absolute liabilities and stockholders' disinterestedness $

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