Lowe's 2001 Annual Report Download - page 31

Lo we’s Co mpanies, Inc.
29
NOTE 1 > SUMMARY OF SI GNI FI CANT
ACCOUNTI NG POLI CI ES
The Co mpany is the wo rld's seco nd largest ho me impro vement
retailer and o perated 744 sto res in 42 states at February 1, 2002.
Belo w are those acco unting po licies co nsidered to be significant.
Fiscal Year The Company’s fiscal year ends o n the Friday near-
est January 31. The fiscal years ended February 1, 2002 and
January 28, 2000 had 52 weeks. The fiscal year ended February 2,
2001 had 53 weeks. All references herein fo r the years 2001, 2000
and 1999 represent the fiscal years ended February 1, 2002,
February 2, 2001 and January 28, 2000, respectively.
Stock Split On May 25, 2001, the Co mpany’s Bo ard o f Directo rs
appro ved a two -fo r-o ne split o f the Co mpany’s co mmo n sto ck. As
a result, shareho lders rec eived o ne additio nal share o n June 29,
2001 fo r each share held as of the reco rd date o n June 8, 2001.
The par value o f the Co mpany's co mmo n sto ck remained $0. 50. All
related financ ial info rmatio n presented, including per share data,
reflects the effects of the sto ck split.
Principles of Consolidation The c o nso lidated financial state-
ments include the acco unts o f the Co mpany and its subsidiaries, all
of whic h are who lly o wned. All material interco mpany acco unts and
transactio ns have been eliminated.
Use of Estimates The preparatio n o f the Co mpany’s financ ial
statements in acco rdance with acco unting princ iples generally
accepted in the United States o f America requires management to
make estimates that affect the repo rted amo unts o f assets, liabil-
ities, revenues and expenses and related disclo sures o f c o ntingent
assets and liabilities. The Co mpany bases these estimates o n his-
to rical results and vario us o ther assumptio ns believed to be rea-
so nable, the results of which fo rm the basis fo r making estimates
co ncerning the carrying values of assets and liabilities that are no t
readily available fro m o ther so urces. Actual results may differ fro m
these estimates.
Cash and Cash Equivalents Cash and cash equivalents include
cash o n hand, demand depo sits, and sho rt-term investments with
o riginal maturities of three mo nths o r less when purc hased.
I nvestment s The Co mpany has a cash management pro gram
which pro vides fo r the investment o f cash balances, no t expected
to be used in current o peratio ns, in financial instruments that have
maturities of up to five years. Investments, exclusive of cash
equivalents, with a maturity date of o ne year o r less fro m the bal-
ance sheet date o r that are expected to be used in current o pera-
tio ns are classified as sho rt-term investments. All o ther invest-
ments are classified as long- term. Investments co nsist primarily of
tax-exempt no tes and bo nds, co rpo rate no tes, municipal preferred
tax-exempt sto ck and repurchase agreements.
The Co mpany has classified all investment sec urities as avail-
able- fo r-sale, and they are carried at fair market value. Unrealized
gains and lo sses o n such securities are included in accumulated
o ther co mprehensive inco me in shareho lders' equity.
Derivative Financial I nstruments The Co mpany do es no t use
derivative financial instruments fo r trading purpo ses. The Co mpany
ado pted Statement o f Financial Acco unting Standards ( SFAS)
No . 133 “Acco unting fo r Derivative Instruments and Hedging
Activities,” as amended by SFAS 137 and SFAS 138, with the fiscal
year beg inning February 3, 2001. The ado ptio n o f this standard
had no material impact o n the Co mpany’s financial statements.
Accounts Receivable The majo rity o f acco unts receivable arise
from sales to co mmercial business custo mers. The allo wance fo r
do ubtful acco unts is based o n histo rical experience and a review of
existing receivables. The allo wance fo r do ubtful acco unts was $4.9
millio n at February 1, 2002 and $2.0 millio n at February 2, 2001.
Sales generated thro ugh the Co mpany’s private label credit
cards are no t reflected in receivables. Under an agreement with
Mo no gram Credit Card Bank o f Geo rgia ( the Bank) , a who lly o wned
subsidiary o f General Electric Capital Co rpo ratio n ( GECC) , co nsumer
credit is extended directly to custo mers by the Bank and all credit
program related services are perfo rmed and co ntro lled direc tly by
the Bank. The Co mpany has the o ptio n, but no o bligation, at the
end of the agreement to purchase the receivables. The to tal po rt-
fo lio o f receivables held by GECC appro ximated $2.9 billion at
February 1, 2002 and $2.5 billio n at February 2, 2001.
Merchandise I nventory Invento ry is stated at the lo wer o f
co st o r market using the first- in, first-o ut metho d o f invento ry
acco unting. The co st of invento ry also includes certain pro cessing
co sts asso c iated with the preparatio n of invento ry fo r resale.
Property and Depreciation Pro perty is rec o rded at c o st. Co sts
asso ciated with majo r additio ns are capitalized and depreciated.
Upo n dispo sal, the co st of properties and related accumulated
depreciatio n are remo ved fro m the acco unts with gains and lo sses
reflected in earnings.
No tes to Co nso lidated Financial Statements
YEARS ENDED FEBRUARY 1, 200 2, FEBRUARY 2, 2001 AND JANUARY 28, 200 0