Best Buy 2003 Annual Report Download - page 163

Goodwill resulting from acquisitions — 406 406
Systematic amortization of goodwill (3) — (3)
Changes in foreign exchange rates — (5) (5)
Balances at March 2, 2002 64 401 465
Goodwill resulting from acquisitions 3 — 3
Final purchase price allocation adjustment — (5) (5)
Impairment charge (64) — (64)
Changes in foreign exchange rates — 30 30
Balances at March 1, 2003 $ 3 $ 426 $ 429
49
$ in millions, except per share amounts
Foreign Currency
Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance
sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of
exchange rate fluctuations on translation of assets and liabilities is recorded as a component of shareholders’ equity. Gains and losses
from foreign currency transactions are included in selling, general and administrative expenses and have not been significant.
Revenue Recognition
We recognize revenue from the sale of merchandise at the time the merchandise is sold and the customer takes possession of the
merchandise. We recognize service revenue at the time the service is provided, the sales price is fixed or determinable, and
collectibility is reasonably assured. Gift card revenue is recognized when redeemed.
We sell extended service contracts on behalf of an unrelated third party. In jurisdictions where we are not deemed to be the obligor on
the contract at the time of sale, commissions are recognized in revenue at the time of sale. In jurisdictions where we are deemed to be
the obligor on the contract at the time of sale, commissions are recognized in revenue ratably over the term of the service contract.
Sales Incentives
We periodically offer sales incentives that entitle our customers to receive a reduction in the price of a product or service. For sales
incentives in which we are the obligor, the reduction in revenue is recognized at the time the product or service is sold.
Shipping and Handling Costs
Amounts billed to customers for shipping and handling are included in revenue. The related costs are included in cost of goods sold.
Vendor Allowances
We receive allowances from vendors as a result of purchasing and promoting their products. Vendor allowances provided as a
reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are recorded as an expense
reduction when the cost is incurred. Subsequent to fiscal 2002, all other vendor allowances, including vendor allowances received in
excess of our cost to promote a vendor’s product, or vendor allowances directly related to purchase of a vendor’s product are initially
deferred. The deferred amounts are then recorded as a reduction of cost of goods sold when the related product is sold. Prior to fiscal
2003, vendor allowances generally were recorded as a reduction of advertising expenses in SG&A (see note 1, Change in Accounting
Principles—Goodwill and Vendor Allowances).
Stock−Based Compensation
In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for Stock−Based
Compensation—Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock−Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair value−based method of accounting for stock−based
employee compensation. In addition, SFAS No. 148 requires expanded and more prominent disclosure in both annual and interim
financial statements about the method of accounting for stock−based employee compensation and the effect of the method on reported
results.
We have stock−based employee compensation plans comprised primarily of fixed stock options. We have not adopted a method under
SFAS No. 148 to expense stock options, but continue to apply Accounting Principles Board (APB) Opinion No. 25, Accounting for