Dillard's 2009 Annual Report Download - page 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies
Description of Business—Dillard’s, Inc. (the ‘‘Company’’) operates retail department stores,
located primarily in the Southeastern, Southwestern and Midwestern areas of the United States, and a
general contracting construction company based in Little Rock, Arkansas. The Company’s fiscal year
ends on the Saturday nearest January 31 of each year. Fiscal years 2009, 2008 and 2007 ended on
January 30, 2010, January 31, 2009 and February 2, 2008, respectively. Fiscal years 2009, 2008 and 2007
included 52 weeks.
Consolidation—The accompanying consolidated financial statements include the accounts of
Dillard’s, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions are eliminated
in consolidation. Investments in and advances to joint ventures in which the Company has a 50%
ownership interest are accounted for by the equity method.
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 the reported amounts of revenues and
expenses during the reporting period. Significant estimates include inventories, sales return, self-insured
accruals, future cash flows for impairment analysis, pension discount rate and taxes. Actual results
could differ from those estimates.
Seasonality—The Company’s business is highly seasonal, and historically the Company has realized
a significant portion of its sales, net income and cash flow in the second half of the fiscal year,
attributable to the impact of the back-to-school selling season in the third quarter and the holiday
selling season in the fourth quarter. Additionally, working capital requirements fluctuate during the
year, increasing in the third quarter in anticipation of the holiday season.
Cash Equivalents—The Company considers all highly liquid investments with an original maturity
of three months or less when purchased or which can be redeemed by forfeiting three months of
earned interest to be cash equivalents. The Company considers receivables from charge card companies
as cash equivalents because they settle the balances within two to three days.
Accounts Receivable, Net—Accounts receivable primarily consists of construction receivables of
CDI and the monthly settlement with GE for Dillard’s share of revenue from the long-term marketing
and servicing alliance. Construction receivables are based on amounts billed to customers. The
Company provides any allowance for doubtful accounts considered necessary based upon a review of
outstanding receivables, historical collection information and existing economic conditions. Accounts
receivable are ordinarily due 30 days after the issuance of the invoice. Contract retentions are due
30 days after completion of the project and acceptance by the owner. Accounts that are past due more
than 120 days are considered delinquent. Delinquent receivables are written off based on individual
credit evaluation and specific circumstances of the customer.
Accounts receivable are reported net of an allowance for doubtful accounts of $0.0 million and
$0.3 million as of January 30, 2010 and January 31, 2009, respectively, pertaining to construction
contract receivables.
Merchandise Inventories—The last-in, first-out retail inventory method (‘‘LIFO RIM’’) is used to
value merchandise inventories. At January 30, 2010 and January 31, 2009, the LIFO RIM cost of
merchandise was approximately equal to the first-in, first-out (‘‘FIFO’’) cost of merchandise.
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