Best Buy 2014 Annual Report Download - page 67

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62
In preparing the accompanying consolidated financial statements, we evaluated the period from February 2, 2014, through the
date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events
were identified for this period.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP")
requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the
consolidated financial statements, as well as the disclosure of contingent liabilities. Future results could be materially affected
if actual results were to differ from these estimates and assumptions.
Cash and Cash Equivalents
Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, treasury bills,
commercial paper and time deposits such as certificates of deposit with an original maturity of 3 months or less when
purchased. The amounts of cash equivalents at February 1, 2014, and February 2, 2013, were $1,705 million and $740 million,
respectively, and the weighted-average interest rates were 0.5% and 0.3%, respectively.
Outstanding checks in excess of funds on deposit (book overdrafts) totaled $62 million and $97 million at February 1, 2014,
and February 2, 2013, respectively, and are reflected within accounts payable in our Consolidated Balance Sheets.
Receivables
Receivables consist principally of amounts due from mobile phone network operators for commissions earned; banks for
customer credit card, certain debit card and electronic benefits transfer (EBT) transactions; and vendors for various vendor
funding programs.
We establish allowances for uncollectible receivables based on historical collection trends and write-off history. Our allowances
for uncollectible receivables were $104 million and $92 million at February 1, 2014, and February 2, 2013, respectively.
Merchandise Inventories
Merchandise inventories are recorded at the lower of cost, using either the average cost or first-in first-out method, or market.
In-bound freight-related costs from our vendors are included as part of the net cost of merchandise inventories. Also included in
the cost of inventory are certain vendor allowances that are not a reimbursement of specific, incremental and identifiable costs
to promote a vendor's products. Other costs associated with acquiring, storing and transporting merchandise inventories to our
retail stores are expensed as incurred and included in cost of goods sold.
Our inventory valuation reflects adjustments for anticipated physical inventory losses (e.g., theft) that have occurred since the
last physical inventory. Physical inventory counts are taken on a regular basis to ensure that the inventory reported in our
consolidated financial statements is properly stated.
Our inventory valuation also reflects markdowns for the excess of the cost over the amount we expect to realize from the
ultimate sale or other disposal of the inventory. Markdowns establish a new cost basis for our inventory. Subsequent changes in
facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established
cost basis.
Restricted Assets
Restricted cash and investments in debt securities totaled $310 million and $366 million at February 1, 2014, and February 2,
2013, respectively, and are included in other current assets or other assets in our Consolidated Balance Sheets. Such balances
are pledged as collateral or restricted to use for vendor payables, general liability insurance, workers' compensation insurance
and insurance business regulatory reserve requirements.
Derivative Instruments
We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to
recognized receivable and payable balances denominated in non-functional currencies, and on certain forecast inventory