Safeway 2012 Annual Report Download - page 58

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
46
Note A: The Company and Significant Accounting Policies
The Company Safeway Inc. (“Safeway” or the “Company”) is one of the largest food and drug retailers in
North America, with 1,641 stores as of year-end 2012. Safeway’s U.S. retail operations are located principally
in California, Hawaii, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area
and the Mid-Atlantic region. The Company’s Canadian retail operations are located principally in British
Columbia, Alberta and Manitoba/Saskatchewan. In support of its retail operations, the Company has an
extensive network of distribution, manufacturing and food processing facilities. The Company also owns and
operates GroceryWorks.com Operating Company, LLC, an online grocery channel, doing business under
the names Safeway.com and Vons.com (collectively “Safeway.com”).
Blackhawk Network, Inc. (“Blackhawk”), a majority-owned subsidiary of Safeway, provides gift cards, other
prepaid products and payment services to consumers through a network of retail store locations in the United
States, Canada, Europe, Mexico and Australia and various online channels. Prepaid products include: closed
loop cards, open loop cards, financial services products and telecom products. Additionally, Blackhawk
provides card production services and a secondary market for prepaid cards.
The Company also has a 49% ownership interest in Casa Ley, S.A. de C.V. (“Casa Ley”), which operates
195 food and general merchandise stores in Western Mexico.
Basis of Presentation The consolidated financial statements include Safeway Inc., a Delaware
corporation, and all majority-owned subsidiaries and have been prepared in accordance with accounting
principles generally accepted in the United States of America. All intercompany transactions and balances
have been eliminated in consolidation. The Company’s investment in Casa Ley is reported using the equity
method. Safeway's equity in earnings of Casa Ley is based on financial information prepared in accordance
with accounting principles generally accepted in the United States and is recorded on a one-month delay
basis because financial information for the latest month is not available from Casa Ley in time to be included
in Safeway’s consolidated results until the following reporting period.
Fiscal Year The Company’s fiscal year ends on the Saturday nearest December 31. The last three fiscal
years consist of the 52-week period ended December 29, 2012 (“fiscal 2012” or “2012”), the 52-week period
ended December 31, 2011 (“fiscal 2011” or “2011”) and the 52-week period ended January 1, 2011 (“fiscal
2010” or “2010”).
Corrections to Previously Reported Financial Statements Subsequent to the issuance of the fiscal 2011
consolidated financial statements, the Company identified an error in the accounting for real estate taxes in
the states of California and Washington. This error, which accumulated gradually over many years, resulted
in liability for real estate taxes being overstated by approximately $42.8 million as of December 31, 2011.
Safeway assessed the materiality of this item on previously issued financial statements in accordance with
the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and concluded that the error was not material to any of
the individual annual or interim periods. In accordance with SAB No. 108, Safeway has corrected the
accompanying consolidated financial statements by increasing 2010 beginning retained earnings by $26.2
million and increasing retained earnings at year-end 2011 by the same amount. This correction increased
Current Deferred Income Taxes by $16.6 million and decreased accrued real estate taxes within Other
Accrued Liabilities by $42.8 million. The effect on the 2011 and 2010 consolidated statement of operations
is insignificant. This correction results in no other revisions to the consolidated financial statements.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.