Costco 2014 Annual Report Download - page 52

from certain business combinations. Goodwill is reviewed for impairment in the fourth quarter of each
fiscal year, or more frequently if circumstances dictate. No impairment of goodwill has been incurred to
date.
Accounts Payable
The Company’s banking system provides for the daily replenishment of major bank accounts as checks
are presented. Included in accounts payable at the end of 2014 and 2013 are $588 and $493,
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 for certain
risks, a wholly-owned captive insurance subsidiary and participation in a reinsurance pool, to provide for
potential liabilities for workers’ compensation, general liability, property damage, directors’ 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 2014 and 2013, these insurance liabilities were
$815 and $727 in the aggregate, respectively, and were included in accounts payable, accrued salaries
and benefits, and other current liabilities in 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 participants. The reinsurance agreement is one year in duration, and new agreements are
entered into by each participant at their discretion at the commencement of the next calendar year. The
participant agreements and practices of the reinsurance program limit any participating members’
individual risk. Income statement adjustments related to the reinsurance program and related impacts to
the consolidated balance sheets 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 2014 and 2013:
2014 2013
Insurance-related liabilities ..........................................................................................
.
$ 371 $ 346
Deferred sales ...............................................................................................................
.
250
204
Cash card liability ..........................................................................................................
.
173
159
Tax-related liabilities .....................................................................................................
.
136
77
Returns reserve .............................................................................................................
.
122
95
Other ...............................................................................................................................
.
169
208
Other current liabilities ..........................................................................................
.
$ 1,221
$ 1,089
Derivatives
The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of
business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts,
seeking to economically hedge the impact of fluctuations of foreign exchange on known future
expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S.
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