Lowe's 2002 Annual Report Download - page 34

32 / 33 LO WE’S CO MPANIES, INC. ANNUAL REPORT 2002
also clarifies that guarantors are required to recognize, at the incep-
tion of a guarantee, a liability for the fair value of the obligation relat-
ing to the guarantee issued. The initial recognition and measurement
provisions of this interpretation are effective for the Company relat-
ing to guarantees entered or modified after December 31, 2002. The
disclosure provisions are effective for the fiscal year ended January 31,
2003. The initial adoption of this standard has not had a material
impact on the Company’s financial statements.
In November 2002, the EITF issued EITF 02-16 “Accounting
by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor.” EITF 02-16 provides guidance for clas-
sification in the reseller’s income statement for various circum-
stances under which cash consideration is received from a vendor
by a reseller. In addition, the issue also provides guidance con-
cerning how cash consideration relating to rebates or refunds
should be recognized and measured. This standard will be effec-
tive for the Company for all vendor reimbursement agreements
entered into or modified after December 31, 2002. The Company
has historically treated volume related discounts or rebates as a
reduction of inventory cost and reimbursements of operating
expenses received from vendors as a reduction of those specific
expenses. The Company’s accounting treatment for these vendor
provided funds is consistent with EITF 02-16 with the exception
of certain cooperative advertising allowances. The Company has
previously treated these funds as a reduction of the overall adver-
tising expense. Under EITF 02-16 cooperative advertising
allowances should be treated as a reduction of inventory cost
unless they represent a reimbursement of specific, incremental,
identifiable costs incurred by the customer to sell the vendor’s
product. Cooperative advertising allowances received from ven-
dors have in the past been both specifically associated with pro-
motions to sell the vendor’s product and also, in certain cases, of a
more general nature. Since the Company had entered into sub-
stantially all of the cooperative advertising allowance agreements
relating to fiscal 2003 prior to EITF 02-16’s effective date, its adop-
tion is not expected to have a material impact on fiscal 2003. The
Company is currently evaluating the impact on fiscal 2004.
Note 2: Investments.
The Company’s investment securities are classified as available-for-
sale. The amortized cost, gross unrealized holding gains and loss-
es and fair values of the investments at January 31, 2003 and
February 1, 2002 were as follows:
January 31, 2003
Gross Gross
(In Millions) Amortized Unrealized Unrealized Fair
Type Cost Gains Losses Value
Municipal Obligations $ 82 $ – $ – $ 82
Money Market Preferred Stock 186 – – 186
Corporate Notes 5 – – 5
Classified as Short-Term 273 – – 273
Municipal Obligations 11 – – 11
Agency Bonds 17 – – 17
Other 1 – – 1
Classified as Long-Term 29 ––29
Total $ 302 $ – $ – $ 302
February 1, 2002
Gross Gross
(In Millions) Amortized Unrealized Unrealized Fair
Type Cost Gains Losses Value
Municipal Obligations $ 9 $ – $ – $ 9
Money Market Preferred Stock 40 – – 40
Corporate Notes 5 – – 5
Classified as Short-Term 54 – – 54
Municipal Obligations 16 1 – 17
Corporate Notes 5 – – 5
Classified as Long-Term 21 1 – 22
Total $ 75 $ 1 $ – $ 76
The proceeds from sales of available-for-sale securities were $2.0
million, $1.0 million and $8.6 million for 2002, 2001 and 2000,
respectively. Gross realized gains and losses on the sale of available-
for-sale securities were not significant for any of the periods pre-
sented. The municipal obligations and agency bonds classified as
long-term at January 31, 2003 will mature in one to five years.
Note 3: Property and
accumulated depreciation.
Property is summarized by major class in the following table:
January 31, February 1,
(In Millions) 2003 2002
Cost:
Land $ 3,133 $ 2,623
Buildings 5,092 4,276
Equipment 3,663 3,106
Leasehold Improvements 929 627
Total Cost 12,817 10,632
Accumulated Depreciation and Amortization (2,465) (1,979)
Net Property $ 10,352 $ 8,653
The estimated depreciable lives, in years, of the Company’s prop-
erty are: buildings, 20 to 40; store, distribution and office equipment,
3 to 10; leasehold improvements, generally the life of the related lease.
Net property includes $460.9 million in assets under capital
leases at January 31, 2003 and February 1, 2002, respectively.