Bed, Bath and Beyond 2008 Annual Report Download - page 19

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BED BATH & BEYOND 2008 ANNUAL REPORT
17
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
A. Nature of Operations
Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath &
Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY, which was
acquired on March 22, 2007. (See “Acquisition,” Note 2). Since May 2008, the Company, through a joint venture, operates two
stores in Mexico under the name “Home & More.” The Company sells a wide assortment of merchandise principally including
domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler
merchandise. As the Company operates in the retail industry, its results of operations are affected by general economic conditions
and consumer spending habits.
B. Fiscal Year
The Company’s fiscal year is comprised of the 52 or 53 week period ending on the Saturday nearest February 28. Accordingly, fiscal
2008 and 2007 represented 52 weeks and ended on February 28, 2009 and March 1, 2008, respectively; fiscal 2006 represented 53
weeks and ended on March 3, 2007.
C. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are
wholly owned.
All significant intercompany balances and transactions have been eliminated in consolidation.
D. Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires
the Company to establish accounting policies and to make estimates and judgments that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical
experience and on other assumptions that it believes to be relevant under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
In particular, judgment is used in areas such as impairment of auction rate securities, inventory valuation, impairment of long-lived
assets, goodwill and other indefinitely lived intangible assets, accruals for self insurance, litigation, store opening, expansion,
relocation and closing costs, the provision for sales returns, vendor allowances, stock-based compensation and income taxes.
Actual results could differ from these estimates.
E. Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash
equivalents. Included in cash and cash equivalents are credit and debit card receivables from banks, which typically settle within
5business days, of $51.8 million and $49.3 million as of February 28, 2009 and March 1, 2008, respectively.
F. Investment Securities
Investment securities primarily consist of auction rate securities, which are securities with interest rates that reset periodically
through an auction process. Auction rate securities are classified as available-for-sale or trading and are stated at fair value, which
had historically been consistent with cost or par value due to interest rates which reset periodically, typically every 7, 28 or 35 days.
As a result, there generally were no cumulative gross unrealized holding gains or losses relating to these auction rate securities.
However,beginning in mid-February 2008 due to market conditions, the auction process for the Company’s auction rate securities
failed and continues to fail. These failed auctions result in a lack of liquidity in the securities, and affect their estimated fair values
at February 28, 2009, but do not affect the underlying collateral of the securities. (See “Investment Securities,” Note 7). All income
from these investments is recorded as interest income.
Those investment securities which the Company has the ability and intent to hold until maturity are classified as held-to-maturity
investments and arestated at amortized cost. Those investment securities which arebought and held principally for the purpose
of selling them in the near term are classified as trading securities and are stated at fair market value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bed Bath & Beyond Inc. and Subsidiaries