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Note 1 - Basis of Presentation and Certain Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2014
Disclosure Text Block [Abstract] |
Basis of Presentation and Significant Accounting Policies [Text Block] |
1. | BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying consolidated financial statements for Tandy Leather Factory, Inc. and its consolidated subsidiaries contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly its financial position as of March 31, 2014 and December 31, 2013, and its results of operations and cash flows for the three-month periods ended March 31, 2014 and 2013. Operating results for the three-month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Inventory. Inventory is stated at the lower of cost or market and is accounted for on the “first in, first out” method. Based on negotiations with vendors, title generally passes to us when merchandise is put on board. Merchandise to which we have title but which have not yet received is recorded as inventory in transit. In addition, the value of inventory is periodically reduced for slow-moving or obsolete inventory based on management’s review of items on hand compared to their estimated future demand. The components of inventory consist of the following:
|  | As of |
|  | March 31, 2014 |  |  | December 31, 2013 |
Inventory on hand: |  |  |  |  |  |  |  |
Finished goods held for sale |  | $ | 26,633,088 |  |  | $ | 24,546,771 |
Raw materials and work in process |  |  | 884,798 |  |  |  | 853,200 |
Inventory in transit |  |  | 3,014,636 |  |  |  | 900,859 |
|  | $ | 30,532,522 |  |  | $ | 26,300,830 |
Goodwill and Other Intangibles. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is required to be evaluated for impairment on an annual basis, absent indicators of impairment during the interim. Application of the goodwill impairment test requires exercise of judgment, including the estimation of future cash flows, determination of appropriate discount rates and other important assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. A two-step process is used to test for goodwill impairment. The first phase screens for impairment, while the second phase (if necessary) measures the impairment. We have elected to perform the annual analysis during the fourth calendar quarter of each year. As of December 31, 2013, management determined that the present value of the discounted estimated future cash flows of the stores associated with the goodwill is sufficient to support their respective goodwill balances. No indicators of impairment were identified during the first quarter of 2014. A summary of changes in our goodwill for the periods ended March 31, 2014 and 2013 is as follows:
|  | Leather Factory |  |  | Tandy Leather |  |  | Total |
Balance, December 31, 2012 |  | $ | 607,319 |  |  | $ | 383,406 |  |  | $ | 990,725 |
Acquisitions and adjustments |  |  | - |  |  |  | - |  |  |  | - |
Foreign exchange gain/loss |  |  | (3,186 | ) |  |  | - |  |  |  | (3,186 | )
Impairments |  |  | - |  |  |  | - |  |  |  | - |
Balance, March 31, 2013 |  | $ | 604,133 |  |  | $ | 383,406 |  |  | $ | 987,539 |
|  | Leather Factory |  |  | Tandy Leather |  |  | Total |
Balance, December 31, 2013 |  | $ | 598,579 |  |  | $ | 383,406 |  |  | $ | 981,985 |
Acquisitions and adjustments |  |  | - |  |  |  | - |  |  |  | - |
Foreign exchange gain/loss |  |  | (4,634 | ) |  |  | - |  |  |  | (4,634 | )
Impairments |  |  | - |  |  |  | - |  |  |  | - |
Balance, March 31, 2014 |  | $ | 593,945 |  |  | $ | 383,406 |  |  | $ | 977,351 |
Other intangibles consist of the following:
|  | As of March 31, 2014 |  |  | As of December 31, 2013 |
|  | Gross |  |  | Accumulated Amortization |  |  | Net |  |  | Gross |  |  | Accumulated Amortization |  |  | Net |
Trademarks, Copyrights |  | $ | 544,369 |  |  | $ | 495,592 |  |  | $ | 48,777 |  |  | $ | 544,369 |  |  | $ | 487,891 |  |  | $ | 56,478 |
Non-Compete Agreements |  |  | 180,156 |  |  |  | 137,073 |  |  |  | 43,083 |  |  |  | 181,216 |  |  |  | 134,466 |  |  |  | 46,750 |
|  | $ | 724,525 |  |  | $ | 632,665 |  |  | $ | 91,860 |  |  | $ | 725,585 |  |  | $ | 622,357 |  |  | $ | 103,228 |
We recorded amortization expense of $11,368 during the first quarter of 2014 compared to $8,526 during the first quarter of 2013. All of our intangible assets, other than goodwill, are subject to amortization under U.S. GAAP. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding 5 years is as follows:
|  | Wholesale Leathercraft |  |  | Retail Leathercraft |  |  | Total |
2014 |  | $ | 455 |  |  | $ | 33,337 |  |  | $ | 33,792 |
2015 |  |  | - |  |  |  | 28,635 |  |  |  | 28,635 |
2016 |  |  | - |  |  |  | 2,000 |  |  |  | 2,000 |
2017 |  |  | - |  |  |  | - |  |  |  | - |
2018 |  |  | - |  |  |  | - |  |  |  | - |
Revenue Recognition. Our sales generally occur via two methods: (1) at the counter in our stores, and (2) shipment by common carrier. Sales at the counter are recorded and title passes as transactions occur. Otherwise, sales are recorded and title passes when the merchandise is shipped to the customer. Our shipping terms are FOB shipping point. We offer an unconditional satisfaction guarantee to our customers and accept all product returns. Net sales represent gross sales less negotiated price allowances, product returns, and allowances for defective merchandise. Comprehensive Income (loss) and Accumulated Other Comprehensive Income (loss). Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-stockholder sources and includes all changes in equity during a period except those resulting from investments by and dividends to stockholders. Our comprehensive income (loss) consists of our net income and foreign currency translation adjustments from our international operations. Recent Accounting Pronouncements. In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The objective of ASU 2013-02 is to improve reporting by requiring entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the statement of operations. The amendments in ASU 2013-02 are required to be applied retrospectively and are effective for reporting periods beginning after December 15, 2012. The adoption of the standard did not have any impact on our consolidated financial statements. In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists” to eliminate the diversity in practice associated with the presentation of unrecognized tax benefits in instances where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 generally requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard did not have a material impact on our consolidated financial statements. In April 2014, FASB issued Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This guidance also changes an entity’s requirements when presenting, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation. A discontinued operation may include a component of an entity, or a business or nonprofit activity. The guidance is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of the new requirements is not expected to have a material impact on our consolidated earnings, financial position or cash flows.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
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