Abercrombie & Fitch 2010 Annual Report Download - page 54

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Table of Contents
Policy Effect if Actual Results Differ from Assumptions
Inventory Valuation
Inventories are principally valued at the lower of average cost or
market utilizing the retail method.
The Company reduces inventory value by recording a valuation
reserve that represents estimated future permanent markdowns
necessary to sell-through the inventory.
Additionally, as part of inventory valuation, an inventory shrink
estimate is made each period that reduces the value of inventory
for lost or stolen items.
The Company has not made any material changes in the
accounting methodology used to determine the shrink reserve or
the valuation reserve over the past three fiscal years.
The Company does not expect material changes in the near term
to the underlying assumptions used to determine the shrink
reserve or valuation reserve as of January 29, 2011. However,
changes in these assumptions do occur, and, should those
changes be significant, they could significantly impact the
ending inventory valuation at cost, as well as the resulting gross
margin(s).
An increase or decrease in the valuation reserve of 10% would
have affected pre-tax income by approximately $2.4 million for
Fiscal 2010.
An increase or decrease in the inventory shrink accrual of 10%
would have been immaterial to pre-tax income for Fiscal 2010.
Property and Equipment
Long-lived assets, primarily comprised of property and equipment,
are reviewed periodically for impairment or whenever events or
changes in circumstances indicate that full recoverability of net
asset balances through future cash flows is in question.
The Company's impairment calculation requires management to
make assumptions and judgments related to factors used in the
evaluation for impairment, including, but not limited to,
management's expectations for future operations and projected
cash flows.
The Company has not made any material changes in the
accounting methodology used to determine impairment loss
over the past three fiscal years.
The Company does not expect material changes in the near term
to the assumptions underlying its impairment calculations as of
January 29, 2011. However, changes in these assumptions do
occur, and, should those changes be significant, they could have
a material impact on the Company's determination of whether or
not there has been an impairment.
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