Costco 2001 Annual Report Download - page 25

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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, net
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 $3,474 at September 2,
2001 and $3,368 at September 3, 2000.
Merchandise Inventories, net
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 $13,650
at September 2, 2001 and $8,150 at September 3, 2000.
September 2, September 3,
2001 2000
Merchandise inventories consist of:
United States (primarily LIFO) ................... $2,244,986 $2,035,097
Foreign (FIFO) .............................. 493,518 454,991
Total .................................... $2,738,504 $2,490,088
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 $19,157 in fiscal 2001, $10,919 in fiscal 2000, and $4,380 in fiscal
1999.
Goodwill
Goodwill, net of accumulated amortization, resulting from certain business combinations is included
in other assets, and totaled $43,831 at September 2, 2001 and $49,230 at September 3, 2000. Goodwill is
being amortized over 2 to 40 years using the straight-line method. Accumulated amortization was $19,757
at September 2, 2001 and $15,896 at September 3, 2000.
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