Circuit City 2002 Annual Report Download - page 31

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Income taxes paid$5,397 $3,819 $5,027
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See notes to consolidated financial statements.
SYSTEMAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- The accompanying consolidated financial statements include the accounts of
Systemax Inc. and its wholly-owned subsidiaries (collectively, the "Company" or "Systemax"). All significant
intercompany accounts and transactions have been eliminated in consolidation. The equity method of accounting
is used for the Company's investment in a 50%-owned joint venture, over which the Company exercises
significant influence. The results of operations of this investee are not material to the results of operations of the
Company. The joint venture brokers paper, a significant portion of which is used by the Company in printing its
catalogs.
Cash and Cash Equivalents - The Company considers amounts held in money market accounts and other short-
term investments with an original maturity date of three months or less to be cash equivalents. The Company's
investments in cash equivalents are classified as debt securities available-for-sale and are stated at fair market
value. Unrealized holding gains and losses are not significant for any of the years presented.
Revenue Recognition
#150; The Company recognizes sales of products, including shipping revenue, at the time
of shipment. Allowances for estimated subsequent customer returns are provided when revenues are recorded.
Costs incurred for the shipping and handling of its products are recorded as cost of sales. Revenue from extended
warranty and support contracts on the Company's assembled PCs is deferred and recognized over the contract
period.
Inventories
- Inventories consist primarily of finished goods and are stated at the lower of cost or market value.
Cost is determined by using the first
-
in, first
-
out method.
Property, Plant and Equipment
– Property, plant and equipment is stated at cost. Depreciation of furniture,
fixtures and equipment is on the straight-
line or accelerated method over their estimated useful lives ranging from
three to ten years. Depreciation of buildings is on the straight-line method over estimated useful lives of 30 to 50
years. Leasehold improvements are amortized over the lesser of the useful lives or the term of the respective
leases.
Capitalized Software Costs – The Company capitalizes purchased software ready for service and capitalizes
software development costs incurred on significant projects from the time that the preliminary project stage is
completed and management commits to funding a project until the project is substantially complete and the
software is ready for its intended use. Capitalized costs include materials and service costs and payroll and
payroll-related costs. Capitalized software costs are amortized using the straight-line method over the estimated
useful life of the underlying system, generally five years.
Product Warranties
– Provisions for estimated future expenses relating to product warranties for the Company's
assembled PCs are recorded as cost of sales when revenue is recorded. Liability estimates are determined based
on management judgment considering such factors as the number of units sold, historical and anticipated rates of
warranty claims and the likely current cost of corrective action.
Foreign Currency Translation
- The financial statements of the Company's foreign entities are translated into
U.S. dollars, the reporting currency, using year-end exchange rates for balance sheet items and average exchange
rates for the statements of operations items. The translation differences are recorded as a separate component of
shareholders' equity.