Best Buy 2008 Annual Report Download - page 74

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$ in millions, except per share amounts or as otherwise noted
• to purchases of investments, $248 and $242, and to included as part of the net cost of merchandise inventories.
sales of investments, $185 and $175, for the years Also included in the cost of inventory are certain vendor
ended March 3, 2007 and February 25, 2006, allowances that are not a reimbursement of specific,
respectively, which were previously reported in change incremental and identifiable costs to promote a vendor’s
in restricted assets within cash provided by (used in) products. Other costs associated with acquiring, storing and
investing activities on our consolidated statements of transporting merchandise inventories to our retail stores are
cash flows. expensed as incurred and included in cost of goods sold.
These reclassifications had no effect on previously reported Our inventory loss reserve represents anticipated physical
consolidated operating income, net earnings or shareholders’ inventory losses (e.g., theft) that have occurred since the last
equity. physical inventory date. Independent physical inventory counts
are taken on a regular basis to ensure that the inventory
Use of Estimates in the Preparation of reported in our consolidated financial statements is properly
Financial Statements stated. During the interim period between physical inventory
counts, we reserve for anticipated physical inventory losses on
The preparation of financial statements in conformity with a location-by-location basis.
accounting principles generally accepted in the United States
(‘‘GAAP’’) requires us to make estimates and assumptions. Our markdown reserve represents the excess of the carrying
These estimates and assumptions affect the reported amounts value, typically average cost, over the amount we expect to
in the consolidated balance sheets and statements of earnings, realize from the ultimate sale or other disposal of the inventory.
as well as the disclosure of contingent liabilities. Future results Markdowns establish a new cost basis for our inventory.
could be materially affected if actual results were to differ from Subsequent changes in facts or circumstances do not result in
these estimates and assumptions. the reversal of previously recorded markdowns or an increase
in that newly established cost basis.
Fiscal Year
Restricted Assets
Our fiscal year ends on the Saturday nearest the end of
February. Fiscal 2008 and 2006 each included 52 weeks, and Restricted cash and investments in debt securities totaled $408
fiscal 2007 included 53 weeks. and $382, at March 1, 2008, and March 3, 2007,
respectively, and are included in other current assets or equity
Cash and Cash Equivalents and other investments in our consolidated balance sheets.
Such balances are pledged as collateral or restricted to use for
Cash primarily consists of cash on hand and bank deposits. vendor payables, general liability insurance, workers’
Cash equivalents primarily consist of money market accounts compensation insurance and warranty programs.
and other highly liquid investments with an original maturity of
three months or less when purchased. The amounts of cash Property and Equipment
equivalents at March 1, 2008, and March 3, 2007, were
$871 and $695, respectively, and the weighted-average Property and equipment are recorded at cost. We compute
interest rates were 4.1% and 4.8%, respectively. depreciation using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are
Outstanding checks in excess of funds on deposit (book depreciated over the shorter of their estimated useful lives or
overdrafts) totaled $159 and $183 at March 1, 2008, and the period from the date the assets are placed in service to the
March 3, 2007, respectively, and are reflected as current end of the initial lease term. Leasehold improvements made
liabilities in our consolidated balance sheets. significantly after the initial lease term are depreciated over the
shorter of their estimated useful lives or the remaining lease
Merchandise Inventories term, including renewal periods, if reasonably assured.
Merchandise inventories are recorded at the lower of cost, Accelerated depreciation methods are generally used for
using either the average cost or first-in, first-out method, or income tax purposes.
market. In-bound freight-related costs from our vendors are
66