Costco 2013 Annual Report Download - page 50

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COSTCO WHOLESALE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in millions, except share data and warehouse number data)
Note 1—Summary of Significant Accounting Policies
Description of Business
Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries
operate membership warehouses based on the concept that offering members low prices on a limited
selection of nationally branded and select private-label products in a wide range of merchandise categories
will produce high sales volumes and rapid inventory turnover. At September 1, 2013, Costco operated 634
warehouses worldwide: 451 United States (U.S.) locations (in 41 U.S. states, Washington, D.C., and Puerto
Rico), 85 Canadian locations, 33 Mexico locations, 25 United Kingdom (U.K.) locations, 18 Japan locations,
10 Taiwan locations, 9 Korea locations, and 3 Australia locations. The Company's online business operates
websites in the U.S., Canada, and the U.K.
Basis of Presentation
The consolidated financial statements include the accounts of Costco Wholesale Corporation, its wholly-
owned subsidiaries, subsidiaries in which it has a controlling interest, consolidated entities in which it has
made equity investments, or has other interests through which it has majority-voting control or it exercises
the right to direct the activities that most significantly impact the entity’s performance. The Company reports
noncontrolling interests in consolidated entities as a component of equity separate from the Company’s
equity. All material inter-company transactions between and among the Company and its consolidated
subsidiaries and other consolidated entities have been eliminated in consolidation. In July 2012, Costco
purchased its former joint venture partner’s 50% equity interest in Costco Mexico. The Company’s net income
excludes income attributable to noncontrolling interests in its operations in Mexico prior to the July 2012
acquisition of the 50% noncontrolling interest, Taiwan, and Korea. Subsequent to the acquisition date, 100%
of Mexico’s operations are included in “net income attributable to Costco.” Unless otherwise noted, references
to net income relate to net income attributable to Costco.
In 2011 and prior to the July 2012 acquisition of the 50% noncontrolling interest in Mexico, the financial
position and results of Mexico’s operations were fully consolidated, and the joint venture partner’s share was
included in “net income attributable to noncontrolling interests” due to the adoption of a new accounting
standard. The initial consolidation of Mexico increased total assets, liabilities, and revenue by approximately
3%, with no impact on net income or net income per common share attributable to Costco. The Company’s
equity method investment in Mexico as of August 29, 2010 was derecognized and the noncontrolling interest
in Mexico totaling $357 was recognized as part of the initial consolidation of the joint venture on August 30,
2010 as shown in the accompanying consolidated statements of equity.
Fiscal Year End
The Company operates on a 52/53 week fiscal year basis with the fiscal year ending on the Sunday closest
to August 31. References to 2013 relate to the 52-week fiscal year ended September 1, 2013. References
to 2012 and 2011 relate to the 53-week and 52-week fiscal years ended September 2, 2012 and August 28,
2011, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates and assumptions.