Best Buy 2007 Annual Report Download - page 42

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27
PART II
$ in millions, except per share amounts
(footnotes continued)
(3) 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 net of tax) to correct our accounting for certain operating lease matters.
Additionally, during the same quarter, we established a sales return liability which reduced gross profit by $15 pre-tax
($10 net of tax). Further, in fiscal 2005 we recognized a $50 tax benefit related to the reversal of valuation allowances
on deferred tax assets as a result of the favorable resolution of outstanding tax matters with the Internal Revenue Service
regarding the disposition of our interest in Musicland. The tax benefit was classified as discontinued operations.
(4) Effective on March 3, 2002, we adopted 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 was 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 was reflected in our fiscal 2003 financial
results as a cumulative effect of a change in accounting principle.
(5) Earnings per share is presented on a diluted basis and reflects three-for-two stock splits effected in August 2005 and
May 2002.
(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 effect of fluctuations in foreign currency exchange rates. All comparable store sales percentage
calculations reflect an equal number of weeks. The method of calculating comparable store sales varies across the
retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers’
methods.
During fiscal 2004, we refined our methodology for calculating our comparable store sales percentage gain to reflect
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 percentage gains for fiscal 2007, 2006, 2005 and 2004 have been computed using the
refined methodology. The comparable store sales percentage gain for fiscal 2003 has not been computed using
the refined methodology. Refining the methodology for calculating our comparable store sales percentage gain did not
impact previously reported revenue, net earnings or cash flows.
(7) Includes both continuing and discontinued operations.
(8) The current ratio is calculated by dividing total current assets by total current liabilities.