Costco 2006 Annual Report Download - page 54

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Should Be Presented in the Income Statement (that is, Gross Versus Net Presentation).” The EITF
reached a consensus that the presentation of taxes on either a gross or net basis is an accounting
policy decision that requires disclosure. EITF 06-03 is effective for the first interim or annual reporting
period beginning after December 15, 2006. Amounts collected from members, which under common
trade practices are referred to as sales taxes, are and have been recorded on a net basis. The
Company has no intention of modifying this accounting policy. Therefore, the adoption of EITF 06-03
will not have any effect on the Company’s financial position or results of operations.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a
Replacement of Accounting Principles Board Opinion No. 20, and FASB Statement No. 3.” SFAS 154
requires retrospective application to prior periods’ financial statements for changes in accounting
principles, unless it is impracticable to determine either the period-specific effects or the cumulative
effect of the change. SFAS 154 also requires that retrospective application of a change in accounting
principle be limited to the direct effects of the change. Indirect effects of a change in accounting
principle, such as a change in non-discretionary profit-sharing payments resulting from an accounting
change, should be recognized in the period of the accounting change. SFAS 154 also requires that a
change in depreciation, amortization, or depletion method for long-lived, non-financial assets be
accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS
154 is effective for accounting changes and corrections of errors made in fiscal years beginning after
December 15, 2005. The Company will adopt the provisions of SFAS 154 beginning in fiscal 2007. The
Company does not believe the adoption will have a significant effect on its future consolidated financial
statements.
Note 2—Short-term Investments
Short-term investments, which consist entirely of debt securities, at September 3, 2006 and August 28,
2005, were as follows:
Fiscal 2006
Cost Basis Unrealized
Gains Unrealized
Losses Recorded
Basis
Available-for-sale securities
Money market mutual funds ............ $ 38,366 $ — $ — $ 38,366
U.S. government and agency securities . . . 651,984 396 (5,630) 646,750
Corporate notes and bonds ............. 505,739 605 (2,785) 503,559
Asset and mortgage backed securities .... 71,801 121 (484) 71,438
Total available-for-sale securities .... 1,267,890 1,122 (8,899) 1,260,113
Held-to-maturity
Certificates of deposit .................. 55,185 — — 55,185
Money market mutual funds ............ 6,883 — — 6,883
Total held-to-maturity securities ...... 62,068 — — 62,068
Total short-term investments ........ $1,329,958 $1,122 $(8,899) $1,322,181
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