Costco 2003 Annual Report Download - page 36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data) (Continued)
Note 1—Summary of Significant Accounting Policies (Continued)
Closing Costs
Warehouse closing costs incurred relate principally to the Company’s efforts to relocate certain warehouses
that were not otherwise impaired to larger and better-located facilities. The provision for fiscal 2003 included
charges of $11,836 for warehouse closing expenses and $2,967 for losses on the sale of real property. The fiscal
2002 provision included charges of $13,683 for warehouse closing expenses and $7,765 for Canadian admin-
istrative reorganization, which were offset by $398 of net gains on the sale of real property. As of August 31,
2003, the Company’s reserve for warehouse closing costs was $8,609, of which $7,833 related to lease obliga-
tions. This compares to a reserve for warehouse closing costs of $11,845 at September 1, 2002, of which $10,395
related to lease obligations.
Interest Income and Other
Interest income and other includes:
Fiscal Year Ended
August 31,
2003
September 1,
2002
September 2,
2001
Interest income ....................................... $21,200 $16,005 $25,908
Minority interest/earnings of affiliates and other ............. 17,325 19,740 17,330
Total ........................................... $38,525 $35,745 $43,238
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income
Taxes.” That standard requires companies to account for deferred income taxes using the asset and liability
method.
Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributed to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to
be realized.
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