earned up to 250 points in the 12 month period. In the UK, guests  receive a £5 certificate for every 50 points they earn. An estimate of  the obligation related to the program, based on historical redemption  patterns, is recorded as deferred revenue and a reduction of net retail  sales  We assess the adequacy of the deferred revenue liability based upon  our review of point conversion and award redemption patterns at  the end of each fiscal quarter. Due to the estimates involved in these  assessments, adjustments to the historical rates are generally made  no more often than annually in order to allow time for more definite  trends to emerge. Based on this assessment at the end of fiscal 2013,  the deferred revenue liability was adjusted downward by $0.1 million,  with a corresponding increase to net retail sales, and a $0.1 million  decrease in net loss. Based on this assessment at the end of fiscal 2012 and 2011, the  deferred revenue liability was adjusted downward by $0.5 million  and $1.5 million, respectively, with a corresponding increase to net  retail sales, and a $0.5 million and $1.5 million decrease in net loss,  respectively.  The calculation of fair value could increase or decrease depending on  changes in the inputs and assumptions used, specifically, expected  conversion and redemption rates. In order to evaluate the sensitivity  of the estimates used in the recognition of deferred revenue, we  applied a hypothetical increase of 100 bps in the conversion and  redemption rates which we believe is appropriate. Based on the  analysis performed as of December 28, 2013, the change in our  assumptions would have resulted in a $0.3 million reduction of net  retail sales. Our income tax expense is based on our income, statutory tax rates,  and tax planning opportunities available in the various jurisdictions  in which we operate. Tax laws are complex and subject to different  interpretations by the taxpayer and respective governmental taxing  authorities. Significant judgment is required in determining our  income tax expense and in evaluating our tax positions, including  evaluating uncertainties. Management assesses the valuation  allowance recorded against deferred tax assets at the end of each  reporting period. Deferred tax assets and liabilities are recognized  for the expected tax consequences of temporary differences between  the tax bases of assets and liabilities and their reported amounts. We  performed an analysis of all available evidence, consistent with the  provisions under the Income Taxes topic of the ASC. As of December  28, 2013, we continue to maintain a valuation allowance on most of  our deferred tax assets. The remaining net deferred tax assets as of  December 28, 2013, represent the estimated future tax benefits to be  received from taxing authorities or future reductions of taxes payable.  Under the Income Taxes topic of the ASC, in order to recognize an  uncertain tax benefit, the taxpayer must be more likely than not  of sustaining the position, and the measurement of the benefit is  calculated as the largest amount that is more than 50 percent likely  In July 2013, the FASB issued accounting guidance requiring entities  to present unrecognized tax benefits as a reduction to any related  deferred tax assets for net operating losses, similar tax losses, or tax  credit carryforwards if such settlement is required or expected in  the event an uncertain tax position is disallowed. Currently effective  U.S. GAAP does not provide explicit guidance on the topic. This  new presentation guidance will become effective prospectively for  fiscal years, and interim periods within those years, beginning after  December 15, 2013. Accordingly, we will adopt this standard in the  first quarter of fiscal 2014. While we are evaluating the impact this  standard will have on the presentation of unrecognized tax benefits  in our consolidated balance sheet, it will not affect our results of  operations, financial condition or cash flows.  to be realized upon resolution of the benefit. Tax authorities regularly  examine the Company’s returns in the jurisdictions in which the  Company does business. Management regularly assesses the tax risk  of the Company’s return filing positions and believes its accruals  for uncertain tax benefits are adequate as of December 28, 2013 and  December 29, 2012. Our market risks relate primarily to changes in interest rates, and  we bear this risk in two specific ways. First, our revolving credit  facility carries a variable interest rate that is tied to market indices  and, therefore, our results of operations and our cash flows can  be impacted by changes in interest rates. Outstanding balances  under our credit facility bear interest at LIBOR plus 1.8%. We had no  borrowings during fiscal 2013. Accordingly, a 100 basis point change  in interest rates would result in no material change to our annual  interest expense. The second component of interest rate risk involves  the short term investment of excess cash in short term, investment  grade interest-bearing securities. If there are changes in interest  rates, those changes would affect the investment income we earn on  these investments and, therefore, impact our cash flows and results of  operations.  We conduct operations in various countries, which expose us to  changes in foreign exchange rates. The financial results of our  foreign subsidiaries and franchisees may be materially impacted by  exposure to fluctuating exchange rates. Reported sales, costs and  expenses at our foreign subsidiaries, when translated into U.S. dollars  for financial reporting purposes, can fluctuate due to exchange rate  movement. While exchange rate fluctuations can have a material  impact on reported revenues, costs and expenses, and earnings, this  impact is principally the result of the translation effect and does not  materially impact our short-term cash flows.  Although we enter into a significant amount of purchase obligations  outside of the U.S., these obligations are settled primarily in U.S.  ITEM 7A. QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK  Income Taxes Recent Accounting Pronouncements  2013 FORM 10-K 28  BUILD-A-BEAR WORKSHOP, INC. 