Abercrombie & Fitch 2013 Annual Report Download - page 57

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57
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Since actual results may differ from those estimates, the
Company revises its estimates and assumptions as new information becomes available.
4. CHANGE IN ACCOUNTING PRINCIPLE
The Company elected to change its method of accounting for inventory from the lower of cost or market utilizing the
retail method to the weighted average cost method effective February 2, 2013. In accordance with generally accepted
accounting principles, all periods have been retroactively adjusted to reflect the period-specific effects of the change to the
weighted average cost method. The Company believes that accounting under the weighted average cost method is preferable as
it better aligns with the Company's focus on realized selling margin and improves the comparability of the Company's financial
results with those of its competitors. Additionally, it will improve the matching of cost of goods sold with the related net sales
and reflect the acquisition cost of inventory outstanding at each balance sheet date. The cumulative adjustment as of January 30,
2010, was an increase in its inventory of $73.6 million and an increase in retained earnings of $47.3 million.
As a result of the retroactive application of the change in accounting for inventory, the following items in the Company's
Consolidated Statements of Operations and Comprehensive Income and Consolidated Statements of Cash Flows have been
restated:
Fiscal Year Ended January 28, 2012 (in thousands, except per share data)
As Reported Effect of Change As Restated
Net Sales $ 4,158,058 $ — $ 4,158,058
Cost of Goods Sold 1,639,188 (31,354) 1,607,834
Gross Profit 2,518,870 31,354 2,550,224
Operating Income 190,030 31,354 221,384
Income from Continuing Operations Before Taxes 186,453 31,354 217,807
Tax Expense for Continuing Operations 59,591 15,078 74,669
Net Income from Continuing Operations 126,862 16,276 143,138
Net Income 127,658 16,276 143,934
Net Income Per Share from Continuing Operations:
Basic $ 1.46 $ 0.19 $ 1.65
Diluted $ 1.42 $ 0.18 $ 1.60
Net Income Per Share:
Basic $ 1.47 $ 0.19 $ 1.66
Diluted $ 1.43 $ 0.18 $ 1.61
Foreign Currency Translation Adjustments (8,655)(3)(8,658)
Other Comprehensive Income (Loss) 12,971 (3) 12,968
Comprehensive Income 140,629 16,273 156,902
As Reported Effect of Change As Restated
Cash flow from operating activities:
Net Income $ 127,658 $ 16,276 $ 143,934
Deferred Taxes (46,330) 15,078 (31,252)
Inventories (184,784)(31,349)(216,133)
Table of Contents ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)