CompUSA 2010 Annual Report Download - page 88

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SYSTEMAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Reclassifications — Certain prior year amounts were reclassified to conform to current year presentation.
Use of Estimates In Financial Statements — The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Fiscal Year — The Company’ s fiscal year ends at midnight on the Saturday closest to December 31. Fiscal years will typically
include 52 weeks, but every few years will include 53 weeks which was the case in 2008. For clarity of presentation herein, all
fiscal years are referred to as if they ended on December 31. The fiscal year will be divided into four fiscal quarters that each end
at midnight on a Saturday. Fiscal quarters will typically include 13 weeks, but the fourth quarter will include 14 weeks in a 53
week fiscal year. For clarity of presentation herein, all fiscal quarters are referred to as if they ended on the traditional calendar
month.
Foreign Currency Translation — The Company has operations in numerous foreign countries. The functional currency of each
foreign country is the local currency. The financial statements of the Company’ s foreign entities are translated into U.S. dollars,
the reporting currency, using year-end exchange rates for assets and liabilities, average exchange rates for the statement of
operations items and historical rates for equity accounts. Translation gains or losses are recorded as a separate component of
shareholders’ equity.
Cash — The Company considers amounts held in money market accounts and other short-term investments, including overnight
bank deposits, with an original maturity date of three months or less to be cash. Cash overdrafts are classified in accounts
payable.
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 except in Europe and retail locations where an average cost is used. Allowances
are maintained for obsolete, slow-moving and non-saleable inventory.
Property, Plant and Equipment — Property, plant and equipment is stated at cost. Furniture, fixtures and equipment, including
equipment under capital leases, are depreciated using the straight-line or accelerated method over their estimated useful lives
ranging from three to ten years. Buildings are depreciated using the straight-line method over estimated useful lives of 30 to 50
years. Leasehold improvements are amortized over the shorter of the useful lives or the term of the respective leases.
Evaluation of Long-lived Assets — Long-lived assets are evaluated for recoverability whenever events or changes in
circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company estimates the
future cash flows expected to result from the use of the asset and eventual disposition. If the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss, equal to the
excess of the carrying amount over the fair market value of the asset is recognized.
Goodwill and intangible assets — Goodwill represents the excess of the cost of acquired assets over the fair value of assets
acquired. The Company tests goodwill and intangibles for impairment annually or more frequently if indicators of impairment
exist. The Company assesses the carrying value of its definite-lived intangible assets if circumstances indicate that those values
may not be recoverable. In addition, goodwill is required to be tested for impairment after a portion of the goodwill is allocated to
a business targeted for disposal. The Company’ s identifiable intangible assets consist of trademarks, trade and domain names,
technology, retail leases and customer lists (See Note 2).
Accruals — Management makes estimates and assumptions that affect amounts reported in the consolidated financial statements
and accompanying notes. These estimates are based upon various factors such as the number of units sold, historical and
anticipated results and data received from third party vendors. Actual results could differ from these estimates. Our most
significant estimates include those related to the costs of vendor drop shipments, sales returns and allowances, cooperative
advertising and customer rebate reserves, and other vendor and employee related costs.