DSW 2009 Annual Report Download - page 50

DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Business Operations — DSW Inc. (“DSW”) and its wholly-owned subsidiaries are herein referred to col-
lectively as DSW or the “Company”. DSW’s Class A Common Shares are listed on the New York Stock Exchange
under the ticker symbol “DSW”. As of January 30, 2010, Retail Ventures, Inc. (“RVI” or “Retail Ventures”) owned
approximately 62.4% of DSW’s outstanding Common Shares, representing approximately 93.0% of the combined
voting power of DSW’s outstanding Common Shares.
DSW is managed in three operating segments: DSW stores, dsw.com and leased departments. DSW stores and
dsw.com are aggregated and presented as one reportable segment, the DSW segment. DSW stores and dsw.com
offer a wide assortment of better-branded dress, casual and athletic footwear for men and women, as well as
handbags and accessories. As of January 30, 2010, DSW operated a total of 305 stores located throughout the United
States. During fiscal 2009, 2008 and 2007, DSWopened 9, 41 and 37 new DSW stores, respectively, and closed two,
two and one DSW stores, respectively. In fiscal 2008, DSW launched dsw.com.
DSW also operates leased departments for four retailers in its leased department segment. As of January 30,
2010, DSW supplied merchandise to 266 Stein Mart stores, 66 Gordmans stores, 23 Filene’s Basement stores and
one Frugal Fannie’s store. The Company’s renewable supply agreements to merchandise leased departments in
Stein Mart, Gordmans, Filene’s Basement and Frugal Fannie’s stores are effective through December 2012, January
2013, January 2013 and April 2012, respectively. During fiscal 2009, 2008 and 2007, DSW added 3, 12 and 22 new
leased departments, respectively, and ceased operations in 24, 13 and 4 leased departments, respectively. DSWowns
the merchandise and the fixtures (except for Filene’s Basement, where DSW only owns the merchandise), records
sales of merchandise, net of returns and sales tax and provides management oversight. The retailers provide the
sales associates and retail space. DSW pays a percentage of net sales as rent.
Fiscal Year — The Company’s fiscal year ends on the Saturday nearest January 31. Fiscal 2009, 2008 and 2007
each consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather
than calendar years.
Use of Estimates — The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant
estimates are required as a part of inventory valuation, depreciation, amortization, recoverability of long-lived
assets and establishing reserves for self-insurance. Although these estimates are based on management’s knowledge
of current events and actions it may undertake in the future, actual results could differ from these estimates.
Financial Instruments — The following assumptions were used to estimate the fair value of each class of
financial instruments:
Cash and Equivalents — Cash and equivalents represent cash, highly liquid investments with original
maturities of three months or fewer at the date of purchase and credit card receivables, which generally settle
within three days. Amounts due from banks for credit card transactions totaled $8.6 million and $7.6 million as
of January 30, 2010 and January 31, 2009, respectively. The carrying amounts of cash and equivalents
approximate fair value.
The Company reviews cash and equivalent balances on a bank by bank basis to identify book overdrafts.
Book overdrafts occur when the amount of outstanding checks exceed the cash deposited at a bank. The
Company reclassifies book overdrafts, if any, to accounts payable.
Investments — Investments are classified as available-for-sale or held-to-maturity securities based on the
Company’s intent. All income generated from these investments is recorded as interest income.
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