Costco 2010 Annual Report Download - page 56

The Company adjusts the carrying value of its employee life insurance contracts to the net cash
surrender value at the end of each reporting period.
Notes receivable generally represent amounts due from cities over a number of years, representing
incentive amounts granted to the Company when a new location was opened, or for the repayment of
certain infrastructure initially paid for by the Company.
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 2010 and 2009 are
$617 and $611, 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 2010 and 2009, these insurance liabilities of
$541 and $500, 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) receives direct premiums,
which 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
that includes other third-party members. The member agreements and practices of the reinsurance
program limit any participating members’ individual risk. Both revenues and costs are presented in
selling, general and administrative expenses in the consolidated statements of income. Income
statement adjustments related to the reinsurance program are recognized as information becomes
known. 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 annual agreement.
Other Current Liabilities
Other current liabilities consist of the following at the end of 2010 and 2009:
2010 2009
2% reward liability .......................................... $ 522 $ 456
Insurance-related liabilities ................................... 263 241
Cash card liability .......................................... 100 93
Other current liabilities ...................................... 87 84
Tax-related liabilities ........................................ 79 54
Sales and vendor consideration liabilities ....................... 77 68
Deferred sales ............................................. 77 65
Sales return reserve ........................................ 72 79
Interest payable ............................................ 51 51
Other Current Liabilities ................................. $1,328 $1,191
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