Barnes and Noble 2002 Annual Report Download - page 31

Recoverability is assessed based on several factors,
including management’s intentions with respect to its
stores and those stores’ projected undiscounted cash
flows. Assumptions underlying such projected cash
flows include historical experience of stores,
competitive environment, purchasing trends and
projected demographics in the areas.
If it is determined that the carrying value of long-lived
assets may not be recoverable, the Company measures
impairment based on the present values of the projected
cash flows using a discount rate determined by the
Company’s management to be commensurate with the
risk involved.
Deferred Charges
Costs incurred to obtain long-term financing are
amortized over the terms of the respective debt
agreements using the straight-line method, which
approximates the interest method. Unamortized costs
included in other noncurrent assets as of February 1,
2003 and February 2, 2002 were $11,130 and $10,436,
respectively. Amortization expense included in interest
and amortization of deferred financing fees were
$2,894, $2,292 and $1,557 during fiscal 2002, 2001
and 2000, respectively.
Derivative Instruments
Under an agreement which expired February 3, 2003,
the Company used an interest-rate swap as a derivative
to modify the interest characteristics of its outstanding
floating rate debt, thereby reducing its exposure to
fluctuations in interest rates. The Company’s accounting
policy was based on its designation of such instruments
as cash flow hedges whereby changes in the fair value in
the derivative have been included in other comprehensive
income. The Company did not enter into the contract
for speculative purposes.
Revenue Recognition
Revenue from sales of the Company's products is
recognized at the time of sale. Sales returns (which are
not significant) are recognized at the time returns are
made.
Readers’ Advantage™ membership entitles the customer
to receive a 10 percent discount on all purchases made
during the twelve-month membership period. The
annual membership fee of $25.00 is non-refundable
after the first 30 days of the membership term. Revenue
is being recognized over the twelve-month membership
period based upon historical spending patterns for
Barnes & Noble customers. Refunds of membership
fees due to cancellations within the first 30 days are
minimal.
Subscription revenue is recognized on a straight-line
basis as magazine issues are delivered.
Advertising Costs
The costs of advertising are expensed as incurred during
the year pursuant to Statement of Position 93-7,
“Reporting on Advertising Costs”. In addition,
consideration received from vendors in conjunction
with the Company’s cooperative advertising program is
netted against the related expenses. Advertising costs
are charged to selling and administrative expenses. As a
result of new requirements set forth in Emerging Issues
Task Force (EITF) Issue 02-16 “Accounting by a
Customer (Including a Reseller) for Certain Consideration
Received from a Vendor”, which are effective for
arrangements entered into after December 31, 2002,
the Company may be required to reclassify some of
its co-op advertising from an offset to selling and
administrative expenses to a reduction in costs of sales
and occupancy. The Company does not expect
implementation of EITF Issue 02-16 to have a material
effect on its annual results of operations.
Closed Store Expenses
Upon a formal decision to close or relocate a store, the
Company charges unrecoverable costs to expense.
Such costs include the net book value of abandoned
fixtures and leasehold improvements and, when a
store is closed, a provision for future lease obligations,
net of expected sublease recoveries. Costs associated
with store closings of $10,111, $9,831 and $5,026
during fiscal 2002, fiscal 2001 and fiscal 2000,
respectively, are included in selling and administrative
expenses in the accompanying consolidated statements
of operations.
Net Earnings Per Common Share
Basic earnings per share is computed by dividing income
available to common shareholders by the weighted-
average number of common shares outstanding. Diluted
earnings per share reflect, in periods in which they have
a dilutive effect, the impact of common shares issuable
upon exercise of its stock options and those of its
GameStop subsidiary, and assumes the conversion of the
Company’s 5.25% convertible subordinated notes for the
period outstanding since their issuance in March 2001.
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
30 2002 Annual ReportBarnes & Noble, Inc.