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SYSCO CORPORATION-Form10-K 49
PARTII
ITEM8Financial Statements and Supplementary Data
Notes to Consolidated Financial Statements
NOTE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 185 distribution facilities located throughout the UnitedStates, Canada and Ireland.
Sysco’s fi scal year ends on the Saturday nearest to June30th. This resulted in a 52-week year ending June30,2012 for fi scal 2012, a 52-week year ending
July2,2011 for fi scal 2011and a 53-week year ending July3,2010 for fi scal 2010.
The accompanying fi nancial statements include the accounts of Sysco and its consolidated subsidiaries. All signifi cant intercompany transactions and
account balances have been eliminated.
The preparation of fi nancial 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
Cash includes cash equivalents such as time deposits, certifi cates 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 specifi c criteria to
determine uncollectible receivables to be written off including whether a customer has fi led for or been placed in bankruptcy, has had accounts referred to
outside parties for collection or has had accounts past due over specifi ed 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 specifi c customer’s inability to meet its fi nancial
obligation to Sysco, a specifi c allowance for doubtful accounts is recorded to reduce the receivable to the net amount reasonably expected to be collected.
Inventories
Inventories consisting primarily of fi nished goods include food and related products and lodging products held for resale and are valued at the lower of
cost (fi rst-in, fi rst-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 classifi ed 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 refl ected 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 was primarily in the development stage
as of June30,2012 and no material amortization had occurred. Amortization commenced in August2012 as the project entered the deployment stage.
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 fi scal years was $20.8million in fi scal
2012, $13.9million in fi scal 2011 and $10.0million in fi scal 2010.