Costco 1999 Annual Report Download - page 24

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COSTCO WHOLESALE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
Note 1—Summary of Significant Accounting Policies (Continued)
Receivables
Receivables consist primarily of vendor rebates and promotional allowances and other miscellaneous
amounts due to the Company, and are net of allowance for doubtful accounts of $4,582 at August 29, 1999
and $4,297 at August 30, 1998.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market as determined primarily by the
retail inventory method, and are stated using the last-in, first-out (LIFO) method for substantially all U.S.
merchandise inventories. The Company believes the LIFO method more fairly presents the results of
operations by more closely matching current costs with current revenues. If all merchandise inventories
had been valued using the first-in, first-out (FIFO) method, inventories would have been higher by $12,150
at August 29, 1999 and $16,150 at August 30, 1998.
August 29, August 30,
1999 1998
Merchandise inventories consist of:
United States (primarily LIFO) ................... $1,799,101 $1,587,285
Foreign (FIFO) .............................. 411,374 323,466
Total ..................................... $2,210,475 $1,910,751
The Company provides for estimated inventory losses between physical inventory counts on the basis
of a standard percentage of sales. This provision is adjusted periodically to reflect the actual shrinkage
results of the physical inventory counts, which generally occur in the second and fourth quarters of the
Company’s fiscal year.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization expenses are computed
using the straight-line method for financial reporting purposes and accelerated methods for tax purposes.
Buildings are depreciated over twenty-five to thirty-five years; equipment and fixtures are depreciated over
three to ten years; and land rights and leasehold improvements are amortized over the initial term of the
lease.
Interest costs incurred on property and equipment during the construction period are capitalized. The
amount of interest costs capitalized was $4,380 in fiscal 1999, $3,542 in fiscal 1998, and $4,097 in fiscal
1997.
Goodwill
Goodwill, included in other assets, totaled $42,568 at August 29, 1999 and $43,229 at August 30, 1998,
resulting from certain previous business combinations. Goodwill is being amortized over 5 to 40 years using
the straight-line method. Accumulated amortization was $14,787 at August 29, 1999 and $12,686 at
August 30, 1998.
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