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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)
Fiscal 2000 Non-Cash Activities
• None.
Fiscal 1999 Non-Cash Activities
• In March 1999, approximately $48,000 principal amount of the $900,000, 3.500% Zero Coupon
Convertible Subordinated Notes were converted into approximately 1.09 million shares of Costco
Common Stock.
Recent Accounting Pronouncements
During June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative and Hedging Activities, and in
June 2000, issued SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS 133. These standards require companies to record derivative financial
instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting
from changes in the fair value of those derivatives would be accounted for based on the use of the
derivative and whether the instrument qualified for hedge accounting, as defined in SFAS 133 and 138. The
Company was required to adopt the provisions of SFAS 133 and 138 on September 4, 2000, the first day of
fiscal 2001. The Company’s use of derivative instruments is limited to the fixed-to-floating swap contract
on its 7.125% Senior Notes, which was terminated on December 12, 2000, and foreign exchange contracts.
The impact of adoption was not material.
In June 2001, the FASB issued SFAS No. 142, ‘‘Accounting for Goodwill and Other Intangibles’’ which
specifies that goodwill and some intangible assets will no longer be amortized, but instead will be subject to
periodic impairment testing. This pronouncement is effective for the Company beginning in fiscal 2003, but
may be adopted in fiscal 2002. The Company is in the process of evaluating the financial statement impact
of the adoption of SFAS No. 142.
In June 2001, the FASB issued SFAS No. 143, ‘‘Accounting for Asset Retirement Obligations,’’
effective for the Company on January 1, 2003. This Statement addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. The Company is in the process of evaluating the financial statement impact of the
adoption of SFAS No. 143.
In August 2001, the FASB issued SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of
Long-Lived Assets,’’ effective for the Company on January 1, 2002. This Statement supersedes FASB
Statement No. 121, ‘‘Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of’’ and other related accounting guidance. The Company is in the process of evaluating the
financial statement impact of the adoption of SFAS No. 144.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and assumptions that affect the reported
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