Safeway 2013 Annual Report Download - page 53

Table of Contents
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Corrections to Previously Reported Financial Statements Subsequent to the issuance of the fiscal 2012 consolidated financial
statements, the Company determined that the accrual for multiemployer health and welfare benefits was understated by $39.5 million as of
December 29, 2012 due to certain labor contracts not accounted for on an accrual basis. This understatement originated many years ago.
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 correction was not material to any of the individual annual or interim periods. Safeway has
corrected the accompanying consolidated financial statements by decreasing 2011 Retained Earnings by $24.2 million, and in the 2012
balance sheet, decreasing Current Deferred Income Taxes by $15.3 million and increasing the multiemployer health and welfare accrual
within Other Accrued Liabilities by $39.5 million. The effect on the 2012 and 2011 consolidated statement of operations is insignificant. This
correction results in no other changes 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.
Translation of Foreign Currencies Assets and liabilities of the Company's foreign subsidiaries and Casa Ley are translated into U.S.
dollars at year-end rates of exchange, and income and expenses are translated at average rates during the year. Adjustments resulting from
translating financial statements into U.S. dollars, net of applicable income taxes, are included as a separate component in the statement of
comprehensive income, within accumulated other comprehensive income in the consolidated balance sheets and within the consolidated
statements of stockholders' equity.
After the net asset sale of Canadian operations ("Sale of Canadian Operations"), the adjustments resulting from translation of retained
assets and liabilities denominated in Canadian dollars are included in the statement of income as a foreign currency gain or loss. Foreign
currency loss was $57.4 million in fiscal 2013.
Revenue Recognition Retail store sales are recognized at the point of sale. Sales tax is excluded from revenue. Internet sales are
recognized when the merchandise is delivered to the customer. Discounts provided to customers in connection with loyalty cards are
accounted for as a reduction of sales.
Safeway records a deferred revenue liability when it sells Safeway gift cards. Safeway records a sale when a customer redeems the gift card.
Safeway gift cards do not expire. The Company reduces the liability and increases other revenue for the unused portion of gift cards
(“breakage”) after two years, the period at which redemption is considered remote. Breakage amounts were $11.6 million, $9.0 million and
$8.9 million in 2013, 2012 and 2011, respectively.
The Company, through its Blackhawk subsidiary, also sells third-party gift cards through Safeway retail operations and through other grocery
and convenience store retailers. Safeway earns a commission which is recorded as other revenue when the third-party gift card is sold to the
end consumer. The liability for redemption and potential income for breakage remains with the third-party merchant; therefore, Safeway does
not record redemption or breakage of these gift cards.
Cost of Goods Sold Cost of goods sold includes cost of inventory sold during the period, including purchase and distribution costs. These
costs include inbound freight charges, purchasing and receiving costs, warehouse inspection costs, warehousing costs and other costs of
Safeway’s distribution network. All vendor allowances are recorded as a reduction of cost of goods when earned. Advertising and promotional
expenses
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