Costco 2009 Annual Report Download - page 58

Accounts Payable
The Company’s banking system provides for the daily replenishment of major bank accounts as
checks are presented. Accordingly, included in accounts payable at the end of 2009 and 2008 are
$611 and $640, respectively, representing the excess of outstanding checks over cash on deposit at
the banks on which the checks were drawn.
Insurance/Self Insurance Liabilities
The Company uses a combination of insurance and self-insurance mechanisms, including a wholly-
owned captive insurance entity and participation in a reinsurance program, to provide for potential
liabilities for workers’ compensation, general liability, property damage, director and officers’ liability,
vehicle liability and employee health care benefits. Liabilities associated with the risks that are retained
by the Company are not discounted and are estimated, in part, by considering historical claims
experience, demographic factors, severity factors, and other actuarial assumptions. The estimated
accruals for these liabilities could be significantly affected if future occurrences and claims differ from
these assumptions and historical trends. As of the end of 2009 and 2008, these insurance liabilities of
$500 and $485, respectively, were included in accounts payable, accrued salaries and benefits, and
other current liabilities on the consolidated balance sheets, classified based on their nature.
The Company’s wholly-owned captive insurance subsidiary (the captive) received $120, $131, and
$140 in direct premiums during 2009, 2008, and 2007, respectively. These revenues are netted against
the Company’s premium costs in selling, general and administrative expenses, in the consolidated
statements of income. The captive participates in a reinsurance program. The member agreements
and practices of the reinsurance program limit any participating members’ individual risk. Reinsurance
premiums assumed and ceded were $76, $68, and $68 during 2009, 2008, and 2007, respectively.
Both revenues and costs are presented on a net basis in selling, general and administrative expenses
in the consolidated statements of income. Income statement adjustments related to the reinsurance
program are recognized as information is received. In the event the Company leaves the reinsurance
program, the Company is not relieved of its primary obligation to the policyholders for activity prior to
the termination of the agreement.
Other Current Liabilities
Other current liabilities consist of the following at the end of 2009 and 2008:
2009 2008
2% Reward liability ......................................... $ 456 $ 422
Insurance related liabilities ................................... 241 238
Cash card liability .......................................... 93 91
Other current liabilities ...................................... 83 82
Sales return reserve ........................................ 79 84
Sales and vendor consideration liabilities ....................... 68 79
Deferred sales adjustment ................................... 65 66
Tax-related liabilities ........................................ 54 44
Interest payable ............................................ 51 51
Other Current Liabilities ................................. $1,190 $1,157
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