Danier Leather Reports Fiscal 2009 Second Quarter Results

Market Wire, January, 2009

Merchandise inventories are valued at the lower of cost, using the weighted average cost method, and net realizable value. For inventories manufactured by the Company, cost includes direct labour, raw materials, manufacturing and distribution centre costs related to inventories and transportation costs that are directly incurred to bring inventories to their present location and condition. For inventories purchased from third party vendors, cost includes the cost of purchase, duty and brokerage, quality assurance costs, distribution centre costs related to inventories and transportation costs that are directly incurred to bring inventories to their present location and condition. The Company estimates the net realizable value as the amount at which inventories are expected to be sold for, taking into account fluctuations of retail prices due to seasonality, less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is not estimated to be recoverable due to obsolescence, damage or declining selling prices. When circumstances that previously caused inventories to be written down below cost no longer exist, the amount of the write-down previously recorded is reversed.

The transitional adjustments resulting from the implementation of Section 3031 included transportation costs incurred to bring inventories from the distribution centre to stores which were previously expensed as part of selling, general and administrative expenses ("SG&A) and are now capitalized and included in cost of sales; storage costs and certain design costs which were previously capitalized and included in cost of sales are now recorded in SG&A. The transitional adjustments were recognized in the first quarter of fiscal 2009 in opening retained earnings and prior periods have not been restated. The implementation of this standard resulted in an increase in opening inventories of $312, a decrease in income taxes recoverable of $122 and an increase of $190 to opening retained earnings. The cost of inventory recognized as an expense is the amount shown as cost of sales in the consolidated statements of earnings and comprehensive earnings for the 13 weeks and 26 weeks ended December 27, 2008. During the 13 weeks ended December 27, 2008, the Company recorded $134 of write-downs of inventory as a result of net realizable value being lower than cost and $NIL of inventory write-downs recognized in previous years was reversed. During the 26 weeks ended December 27, 2008, the Company recorded $284 of write-downs of inventory as a result of net realizable value being lower than cost and $222 of inventory write-downs recognized in previous years was reversed.

(c) Recent Accounting Pronouncements:

CICA Section 3064 - Goodwill and Intangible Assets

This CICA Handbook section issued in February 2008 replaces Section 3062 -- Goodwill and Other Intangible Assets and Section 3450 -- Research and Development Costs. The new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets subsequent to its initial recognition. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The new standard also provides guidance for the recognition of internally developed intangible assets, including assets developed from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. The new standard is applicable to fiscal years beginning on or after October 1, 2008. The Company has evaluated the new section and currently does not expect the implementation of this new section to have a significant impact on its consolidated financial statements.