Best Buy 2005 Annual Report Download - page 38

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$ in millions, except per share amounts
(footnotes continued)
(2) During the fourth quarter of fiscal 2005, following a review of our lease accounting practices, we recorded a
cumulative charge of $36 pre-tax ($23 after-tax) to correct our accounting for certain operating lease matters.
Additionally, we established a sales return liability which reduced gross profit by $15 pre-tax ($10 after-tax).
Finally, we reclassified certain transportation and distribution costs from selling, general and administrative expenses
to cost of goods sold and reclassified comparable amounts for prior periods to conform to the current presentation.
(3) During the third quarter of fiscal 2002, we acquired Future Shop Ltd. During the fourth quarter of fiscal 2001, we
acquired Musicland Stores Corporation and Magnolia Hi-Fi, Inc., which began doing business as Magnolia Audio
Video during fiscal 2004. The results of operations of these businesses are included from their respective dates of
acquisition. Musicland’s financial results are included in discontinued operations.
(4) Effective on March 3, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill
and Other Intangible Assets. During fiscal 2003, we completed the required goodwill impairment testing and
recognized an after-tax, noncash impairment charge of $40 that is reflected in our fiscal 2003 financial results as a
cumulative effect of a change in accounting principle. Also effective on March 3, 2002, we changed our method of
accounting for vendor allowances in accordance with Emerging Issues Task Force (EITF) Issue No. 02-16, Accounting
by a Reseller for Cash Consideration Received from a Vendor. The change resulted in an after-tax, noncash charge
of $42 that also is reflected in our fiscal 2003 financial results as a cumulative effect of a change in accounting
principle. Refer to Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial
Statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Prior fiscal years have not been restated to reflect the pro forma effects of these changes.
(5) Earnings per share is presented on a diluted basis and reflects a three-for-two stock split in May 2002. During the
fourth quarter of fiscal 2005, we adopted Emerging Issues Task Force (EITF) Issue No. 04-08, The Effect of
Contingently Convertible Instruments on Diluted Earnings per Share. The calculation of diluted earnings per share
assumes the conversion of our convertible debentures, due in 2022, into 5.8 million shares of common stock and
adds back the related after-tax interest expense. Prior fiscal years have been restated to reflect the adoption of EITF
Issue No. 04-08.
(6) Comprised of revenue at stores and Web sites operating for at least 14 full months, as well as remodeled and
expanded locations. Relocated stores are excluded from the comparable store sales calculation until at least 14 full
months after reopening. Acquired stores are included in the comparable store sales calculation beginning with the
first full quarter following the first anniversary of the date of acquisition. The calculation of the comparable store
sales percentage gain excludes the impact of fluctuations in foreign currency exchange rates.
In the third quarter of fiscal 2004, we refined our methodology for calculating our comparable store sales
percentage change. It now reflects the impact of non-point-of-sale (non-POS) revenue transactions. We refined our
comparable store sales calculation in light of changes in our business. Previously, our comparable store sales
calculation was based on store POS revenue. The comparable store sales changes for fiscal 2005 and fiscal 2004
have been computed using the refined methodology. The comparable store sales changes for prior fiscal years have
not been computed using the refined methodology. Refining the methodology for calculating our comparable store
sales percentage change did not impact previously reported revenue, net earnings or cash flows.
(7) Includes both continuing and discontinued operations. The current ratio is calculated by dividing total current assets
by total current liabilities.
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