Dollar General 2006 Annual Report Download - page 53

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation and accounting policies
Basis of presentation
These notes contain references to the years 2007, 2006, 2005 and 2004, which represent
fiscal years ending or ended February 1, 2008, February 2, 2007, February 3, 2006 and
January 28, 2005, respectively. Fiscal year 2007 will be, and each of 2006 and 2004 was, a 52-
week accounting period while 2005 was a 53-week accounting period. The Company’ s fiscal
year ends on the Friday closest to January 31. The consolidated financial statements include all
subsidiaries of the Company, except for its not-for-profit subsidiary the assets and revenues of
which are not material. Intercompany transactions have been eliminated.
The Company leases three of its distribution centers (“DCs”) from lessors, which meet
the definition of a Variable Interest Entity (“VIE”) as described by Financial Accounting
Standards Board (“FASB”) Interpretation 46, “Consolidation of Variable Interest Entities” (“FIN
46”), as revised. One of these DCs has been recorded as a financing obligation whereby the
property and equipment, along with the related lease obligations, are reflected in the consolidated
balance sheets. The other two DCs, excluding the equipment, have been recorded as operating
leases in accordance with Statement of Financial Accounting Standards (“SFAS”) 98,
“Accounting for Leases.” The Company is not the primary beneficiary of these VIEs and,
accordingly, has not included these entities in its consolidated financial statements.
Business description
The Company sells general merchandise on a retail basis through 8,229 stores (as of
February 2, 2007) located primarily in the southern, southwestern, midwestern and eastern
United States. The Company has DCs in Scottsville, Kentucky; Ardmore, Oklahoma; South
Boston, Virginia; Indianola, Mississippi; Fulton, Missouri; Alachua, Florida; Zanesville, Ohio;
Jonesville, South Carolina and Marion, Indiana.
The Company purchases its merchandise from a wide variety of suppliers. Approximately
11% of the Company’ s purchases in 2006 were made from The Procter & Gamble Company.
The Company’ s next largest supplier accounted for approximately 5% of the Company’ s
purchases in 2006.
Restatement of previously issued consolidated financial statements
The Company has historically classified self-insurance and deferred rent liabilities within
Accrued expenses and other, which is included in Total current liabilities on the Company’s
consolidated balance sheets. Management has concluded that a portion of these liabilities
(including approximately $89.3 million and $23.0 million of self-insurance and deferred rent
liabilities, respectively) and certain other assets of $15.8 million and liabilities of $18.3 million
should be classified as noncurrent, along with the related deferred income tax impacts, where
applicable. As a result, the Company has restated the accompanying February 3, 2006
consolidated balance sheet to correct the prior presentation.
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