Bed, Bath and Beyond 2009 Annual Report Download - page 19

BED BATH & BEYOND 2009 ANNUAL REPORT
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bed Bath & Beyond Inc. and Subsidiaries
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). In addition, the Company is a partner in a joint venture which operates
two stores in the Mexico City market under the name “Home & More.” The Company sells a wide assortment of domestics
merchandise and home furnishings, which include food, giftware, health and beauty care items and infant and toddler merchan-
dise. 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 2009, 2008, and 2007 represented 52 weeks and ended on February 27, 2010, February 28, 2009 and March 1, 2008,
respectively.
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 (“GAAP”)
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
5 business days, of $56.0 million and $51.8 million as of February 27, 2010 and February 28, 2009, respectively.
F. Investment Securities
Investment securities consist primarily of U.S. Treasury Bills with remaining maturities of less than one year and auction rate secu-
rities, which are securities with interest rates that reset periodically through an auction process. The U.S. Treasury Bills are classi-
fied as short term held-to-maturity securities and stated at their amortized cost which approximates fair value. Auction rate secu-
rities 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 cumu-
lative 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 27, 2010, but do not affect
the underlying collateral of the securities. (See “Fair Value Measurements,” Note 5 and “Investment Securities,” Note 6).
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