Bed, Bath and Beyond 2001 Annual Report Download - page 12

BED BATH & BEYOND ANNUAL REPORT 2001
10
J. INVESTMENT SECURITIES
Investment securities at March 2, 2002 consist of U.S.
Government Agency debt securities. Because the Company has
the ability and intent to hold the securities until maturity, it
classifies its securities as held-to-maturity. These investment
securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts.
Premiums and discounts are amortized or accreted over the
life of the related held-to-maturity securities as an adjustment to
interest using the effective interest method. Dividend and interest
income are recognized when earned.
K. DEFERRED RENT
The Company accounts for scheduled rent increases contained
in its leases on a straight-line basis over the noncancelable lease
term. Deferred rent amounted to $26.5 million and $23.3 million
as of March 2, 2002 and March 3, 2001, respectively.
L. SELF INSURANCE
The Company is self insured for various insurance programs. Self
insurance liabilities are based on actuarially determined estimates
of claims.
M. SHAREHOLDERS’ EQUITY
In July 2000, the Board of Directors of the Company approved a
two-for-one split of the Company’s common stock effected in the
form of a 100% stock dividend. The stock dividend was
distributed on August 11, 2000 to shareholders of record on
July 28, 2000.
Unless otherwise stated, all references to common shares
outstanding and net earnings per share are on a post-split basis.
N. REVENUE RECOGNITION
Sales are recognized upon purchase by customers at our retail
stores or when shipped for products purchased from our website.
The value of point of sale coupons and point of sale rebates that
result in a reduction of the price paid by the customer are
recorded as a reduction of sales. Shipping and handling fees that
are billed to a customer in a sale transaction are recorded in
sales. Revenues from gift cards, gift certificates and store credits
are recognized when redeemed. Sales returns, which are reserved
for based on historical experience, are provided for in the period
that the related sales are recorded.
O. COST OF SALES
Cost of sales includes the cost of merchandise; certain buying,
occupancy and indirect costs; shipping and handling costs and
free merchandise incentives.
P. S TORE OPENING, EXPANSION, RELOCATION AND CLOSING COSTS
Store opening and expansion costs are charged to earnings as
incurred. Costs related to store relocations and closings are
provided for in the period in which management approves the
relocation or closing of a store.
Q. ADVERTISING COSTS
Expenses associated with store advertising are charged to
earnings as incurred.
R. INCOME TAXES
The Company files a consolidated Federal income tax return.
Separate income tax returns are filed with each state and territory
in which the Company conducts business.
The Company accounts for its income taxes using the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in earnings in the period that includes the
enactment date.
S. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash and cash
equivalents, investment securities, accounts payable, accrued
expenses and other current liabilities, and other long term
liabilities. The Company’s investment securities consist of held-to-
maturity debt securities which are stated at amortized cost,
adjusted for amortization of premium to maturity. Since the
investment was acquired on February 28, 2002, its fair value is
equal to its book value on March 2, 2002. The book value of all
other financial instruments are representative of their fair values.
Notes to Consolidated Financial Statements
(Continued)