Costco 2003 Annual Report Download - page 21

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities.” This statement addresses financial accounting and reporting of costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring).” This statement requires that a liability for a cost associated with an exit or disposal activity
should be recognized at fair value when the liability is incurred. SFAS No. 146 was effective for the Company’s
2003 fiscal year. The adoption of SFAS No. 146 did not have a material impact on the Company’s consolidated
results of operations, financial position or cash flows, other than to impact the timing of charges related to future
warehouse relocations.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—
Transition and Disclosure,” which provides guidance for transition to the fair value based method of accounting
for stock-based employee compensation and the required financial statement disclosure. Effective September 3,
2002 the Company adopted the fair value based method of accounting for stock-based compensation. See Note
(1) and Note (5) of the Company’s consolidated financial statements.
In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation
established financial statement disclosure requirements for companies that enter into or modify certain types of
guarantees subsequent to December 31, 2002. Beginning in calendar 2003, the standard requires that companies
record the fair value of certain types of guarantees as a liability in the financial statements. The adoption of this
interpretation did not have a material impact on the Company’s results of operations, consolidated financial posi-
tion or cash flows.
In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest
Entities.” In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either does not have equity investors with voting rights or has equity investors that do
not provide sufficient financial resources for the entity to support its activities. Interpretation No. 46 requires a
variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss
from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or
both. The consolidation requirements of Interpretation No. 46 apply immediately to variable interest entities cre-
ated after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial state-
ments issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption
of this interpretation did not have a material impact on the Company’s consolidated results of operations, finan-
cial position or cash flows.
In November 2002, the EITF reached a consensus on EITF 00-21, “Revenue Arrangements with Multiple
Deliverables,” with respect to determining when and how to allocate revenue from sales with multiple deliver-
ables. The EITF 00-21 consensus provides a framework for determining when and how to allocate revenue from
sales with multiple deliverables based on a determination of whether the multiple deliverables qualify to be ac-
counted for as separate units of accounting. The consensus is effective prospectively for arrangements entered
into in fiscal periods beginning after June 15, 2003. The adoption of this consensus did not have a material im-
pact on the Company’s consolidated results of operations, financial position or cash flows.
In November 2002, the EITF reached consensus on certain issues discussed in EITF 02-16, “Accounting by
a Customer (Including a Reseller) for Certain Consideration Received from a Vendor,” with respect to determin-
ing how a reseller should characterize consideration received from a vendor and when to recognize and how to
measure that consideration in its income statement. Requirements for recognizing volume-based rebates are
effective for arrangements entered into or modified after November 21, 2002, and resellers with other supplier
payments should generally apply the new rules prospectively for agreements entered into or modified after De-
cember 31, 2002. The adoption of this consensus did not have a material impact on the Company’s consolidated
results of operations, financial position or cash flows in fiscal 2003. However, the Company does expect the
adoption of this consensus to impact interim quarterly financial information, commencing with the first quarter of
fiscal 2004, as the application of the consensus will result in a change in the timing for the recognition of some
vendor allowances for certain agreements entered into subsequent to December 31, 2002.
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