Costco 2008 Annual Report Download - page 56

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Short-term Investments
In general, short-term investments have a maturity of three months to five years at the date of
purchase. Investments with maturities beyond five years may be classified as short-term based on their
highly liquid nature and because such marketable securities represent the investment of cash that is
available for current operations. Short-term investments classified as available-for-sale are recorded at
market value using the specific identification method with the unrealized gains and losses reflected in
accumulated other comprehensive income until realized. The estimate of fair value is based on publicly
available market information or other estimates determined by management. Realized gains and
losses from the sale of available-for-sale securities, if any, are determined on a specific identification
basis.
Receivables, net
Receivables consist of the following at the end of 2008 and 2007:
2008 2007
Vendor rebates, promotional allowances and other ........... $360,658 $339,024
Reinsurance receivables ................................ 152,042 149,346
Receivables from governmental entities .................... 89,268 143,362
Other receivables ...................................... 83,485 78,442
Third-party pharmacy receivables ......................... 66,361 55,302
Allowance for doubtful accounts .......................... (3,846) (3,459)
Accounts Receivable, net ............................ $747,968 $762,017
Vendor receivable balances are generally presented on a gross basis separate from any related
payable due. In certain circumstances, these receivables may be settled against the related payable to
that vendor.
Reinsurance receivables are held by the Company’s wholly-owned captive insurance subsidiary. The
receivable balance represents amounts ceded to the reinsurance pool, and are reflected on a gross
basis, separate from the amounts assumed, which are presented within other current liabilities on the
consolidated balance sheets on a gross basis.
Third-party pharmacy receivables generally relate to amounts due from members’ insurance
companies for the amount above their co-pay, which is collected at the point-of-sale.
Amounts are recorded net of an allowance for doubtful accounts. Management determines the
allowance for doubtful accounts based on historical experience and application of the specific
identification method.
Vendor Rebates and Allowances
Periodic payments from vendors in the form of volume rebates or other purchase discounts that are
evidenced by signed agreements are reflected in the carrying value of the inventory when earned or as
the Company progresses towards earning the rebate or discount and as a component of merchandise
costs as the merchandise is sold. Other consideration received from vendors is generally recorded as
a reduction of merchandise costs upon completion of contractual milestones, terms of the related
agreement, or by other systematic approach.
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