Sysco 2011 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2011 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 105

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Business and Consolidation
Sysco Corporation, acting through its subsidiaries and divisions, (Sysco or the company), is engaged in the marketing and distribution of a
wide range of food and related products primarily to the foodservice or food-away-from-home industry. These services are performed for
approximately 400,000 customers from 177 distribution facilities located throughout the United States, Canada and Ireland.
Sysco’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ending July 2, 2011, a 53-week year ending July 3,
2010 for fiscal 2010 and a 52-week year ending June 27, 2009 for 2009.
The accompanying financial statements include the accounts of Sysco and its consolidated subsidiaries. All significant intercompany
transactions and account balances have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets, liabilities, sales and expenses. Actual results could differ from the estimates used.
Cash and Cash Equivalents
For cash flow purposes, cash includes cash equivalents such as time deposits, certificates of deposit, short-term investments and all highly
liquid instruments with original maturities of three months or less, which are recorded at fair value.
Accounts Receivable
Accounts receivable consist primarily of trade receivables from customers and receivables from suppliers for marketing or incentive
programs. Sysco determines the past due status of trade receivables based on contractual terms with each customer. Sysco evaluates the
collectability of accounts receivable and determines the appropriate reserve for doubtful accounts based on a combination of factors. The
company utilizes specific criteria to determine uncollectible receivables to be written off including whether a customer has filed for or been placed
in bankruptcy, has had accounts referred to outside parties for collection or has had accounts past due over specified periods. Allowances are
recorded for all other receivables based on an analysis of historical trends of write-offs and recoveries. In addition, in circumstances where the
company is aware of a specific customer’s inability to meet its financial obligation to Sysco, a specific allowance for doubtful accounts is recorded
to reduce the receivable to the net amount reasonably expected to be collected.
Inventories
Inventories consisting primarily of finished goods include food and related products and lodging products held for resale and are valued at
the lower of cost (first-in, first-out method) or market. Elements of costs include the purchase price of the product and freight charges to deliver
the product to the company’s warehouses and are net of certain cash or non-cash consideration received from vendors (see “Vendor
Consideration”).
Plant and Equipment
Capital additions, improvements and major replacements are classified as plant and equipment and are carried at cost. Depreciation is
recorded using the straight-line method, which reduces the book value of each asset in equal amounts over its estimated useful life, and is
included within operating expenses in the consolidated results of operations. Maintenance, repairs and minor replacements are charged to
earnings when they are incurred. Upon the disposition of an asset, its accumulated depreciation is deducted from the original cost, and any gain or
loss is reflected in current earnings.
Certain internal and external costs related to the acquisition and development of internal use software being built within our Business
Transformation Project are capitalized within plant and equipment during the application development stages of the project. This project is
primarily in the development stage as of July 2, 2011 and no material depreciation has occurred.
Applicable interest charges incurred during the construction of new facilities and development of software for internal use are capitalized as
one of the elements of cost and are amortized over the assets’ estimated useful lives. Interest capitalized for the past three fiscal years was
$13.9 million in fiscal 2011, $10.0 million in fiscal 2010 and $3.5 million in fiscal 2009.
Long-Lived Assets
Management reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life based on
updated projections on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the
potential impairment is measured at fair value.
45