Bed, Bath and Beyond 2010 Annual Report Download - page 19

BED BATH & BEYOND 2010 ANNUAL REPORT
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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. 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. Domestics merchandise includes
categories such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories such
as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables and certain juvenile
products. 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 2010, 2009 and 2008 represented 52 weeks and ended on February 26, 2011, February 27, 2010 and February 28, 2009,
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 inventory valuation, impairment of long-lived assets, impairment of auction rate
securities, 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 and
certain other 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 $61.9 million and $56.0 million as of February 26, 2011 and February 27, 2010, respectively.
F. Investment Securities
Investment securities consist primarily of U.S. Treasury Bills with remaining maturities of less than one year and auction rate
securities, which are securities with interest rates that reset periodically through an auction process. The U.S. Treasury Bills are
classified as short term held-to-maturity securities and are stated at their amortized cost which approximates fair value. 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 26,
2011 and February 27, 2010, but do not affect the underlying collateral of the securities. (See “Fair Value Measurements,” Note
4 and “Investment Securities,” Note 5). All income from these investments is recorded as interest income.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bed Bath & Beyond Inc. and Subsidiaries