Costco 1999 Annual Report Download - page 34

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COSTCO WHOLESALE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
Note 6—Income Taxes (Continued)
Reconciliation between the statutory tax rate and the effective rate for fiscal 1999, 1998, and 1997 is as
follows:
1999 1998 1997
Federal taxes at statutory rate ........ $231,756 35.00% $ 268,241 35.00% $182,115 35.00%
State taxes, net ................... 28,870 4.36 33,722 4.40 22,374 4.30
Foreign taxes, net ................. 10,532 1.59 8,543 1.11 5,452 1.05
Other ......................... (6,295) (0.95) (3,945) (0.51) (1,809) (.35)
Provision at effective tax rate ........ $264,863 40.00% $ 306,561 40.00% $208,132 40.00%
The components of the deferred tax assets and liabilities are as follows:
August 29, August 30,
1999 1998
Accrued liabilities ........................... $118,912 $93,158
Deferred membership fees ..................... 78,151 —
Other .................................... 15,589 14,010
Total deferred tax assets ..................... 212,652 107,168
Property and equipment ...................... 52,795 67,293
Merchandise inventories ...................... 42,551 33,589
Other .................................... 10,684 1,022
Total deferred tax liabilities .................. 106,030 101,904
Net deferred tax assets ....................... $106,622 $ 5,264
The deferred tax accounts at August 29, 1999 and August 30, 1998 include current deferred income
tax assets of $164,839 and $59,667, respectively, and non-current deferred income tax liabilities of $58,217
and $54,403, respectively. Current deferred income tax assets are included in other current assets.
Note 7—Commitments and Contingencies
Legal Proceedings
The Company is involved from time to time in claims, proceedings and litigation arising from its
business and property ownership. The Company does not believe that any such claim, proceeding or
litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial
position or results of its operations.
Note 8—Segment Reporting
In fiscal 1999, the Company adopted SFAS No. 131, ‘‘Disclosures about Segments of an Enterprise
and Related Information’’, which established reporting and disclosure standards for an enterprise’s
operating segments. Operating segments are defined as components of an enterprise for which separate
financial information is available and regularly reviewed by the Company’s senior management.
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