Best Buy 2012 Annual Report Download - page 69

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$ in millions, except per share amounts or as otherwise noted
69
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP")
requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the
Consolidated Balance Sheets and Consolidated Statements of Earnings, as well as the disclosure of contingent liabilities. Future
results could be materially affected if actual results were to differ from these estimates and assumptions.
Fiscal Year
Our fiscal year ends on the Saturday nearest the end of February. Fiscal 2012 included 53 weeks and fiscal 2011 and 2010 each
included 52 weeks.
On November 2, 2011, our Board of Directors approved a change in our fiscal year-end from the Saturday nearest the end of
February to the Saturday nearest the end of January, effective beginning with our fiscal year 2013. As a result of this change,
our fiscal year 2013 transition period will be 11 months and will end on February 2, 2013, and we will begin consolidating the
results of our Europe, China and Mexico operations on a one-month lag, compared to a two-month lag in fiscal year 2012, to
continue aligning our fiscal reporting periods with statutory filing requirements in certain foreign jurisdictions. We will begin
filing our quarterly reports on Form 10-Q based on the new fiscal year-end beginning with the first quarter of fiscal year 2013.
We also currently plan to report the first quarter of fiscal year 2013 as a three-month period, which will include the results of
the last month of fiscal year 2012.
Cash and Cash Equivalents
Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, U.S. Treasury
bills, commercial paper and time deposits such as certificates of deposit with an original maturity of three months or less when
purchased. The amounts of cash equivalents at March 3, 2012, and February 26, 2011, were $343 and $120, respectively, and
the weighted-average interest rates were 0.1% and 0.3%, respectively.
Outstanding checks in excess of funds on deposit (book overdrafts) totaled $80 and $57 at March 3, 2012, and February 26,
2011, respectively, and are reflected within Accounts payable in our Consolidated Balance Sheets.
Receivables
Receivables consist principally of amounts due from mobile phone network operators for commissions earned; banks for
customer credit card, certain debit card and electronic benefits transfer (EBT) transactions; and vendors for various vendor
funding programs.
We establish allowances for uncollectible receivables based on historical collection trends and write-off history. Our allowances
for uncollectible receivables were $72 and $107 at March 3, 2012, and February 26, 2011, respectively.
Merchandise Inventories
Merchandise inventories are recorded at the lower of cost using either the average cost or first-in first-out method, or market.
In-bound freight-related costs from our vendors are included as part of the net cost of merchandise inventories. Also included in
the cost of inventory are certain vendor allowances that are not a reimbursement of specific, incremental and identifiable costs
to promote a vendor's products. Other costs associated with acquiring, storing and transporting merchandise inventories to our
retail stores are expensed as incurred and included in cost of goods sold.
Our inventory valuation reflects adjustments for anticipated physical inventory losses (e.g., theft) that have occurred since the
last physical inventory. Physical inventory counts are taken on a regular basis to ensure that the inventory reported in our
consolidated financial statements is properly stated.
Our inventory valuation also reflects markdowns for the excess of the cost over the amount we expect to realize from the
ultimate sale or other disposal of the inventory. Markdowns establish a new cost basis for our inventory. Subsequent changes in
facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in that newly established
cost basis.