GNC 2010 Annual Report Download - page 82

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements and footnotes have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP") and with the instructions to Form 10-K and Regulation S-X. The
Company's normal reporting period is based on a calendar year.
The financial statements as of December 31, 2009, 2008 and 2007 reflect periods subsequent to the Merger and include the accounts of
the Company and its wholly owned subsidiaries. Included for the year ended 2009 and 2008 and for the period from March 16, 2007 through
December 31, 2007 are fair value adjustments to assets and liabilities, including inventory, goodwill, other intangible assets and property, plant
and equipment. Accordingly, the accompanying financial statements for the periods prior to the Merger are labeled as "Predecessor" and the
periods subsequent to the Merger are labeled as "Successor".
Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all of its subsidiaries and
a variable interest entity. All material intercompany transactions have been eliminated in consolidation.
The Company has no relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been established for the purpose of facilitating off balance sheet arrangements, or other
contractually narrow or limited purposes.
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP principles requires management to make
estimates and assumptions. Accordingly, these estimates and assumptions 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. Some of the most significant estimates pertaining to the Company include the valuation of inventories, the allowance for
doubtful accounts, income tax valuation allowances and the recoverability of long-lived assets. On a regular basis, management reviews its
estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After
such reviews and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Cash and Cash Equivalents. The Company considers cash and cash equivalents to include all cash and liquid deposits and
investments with a maturity of three months or less. The majority of payments due from banks for third-party credit cards process within 24-48
hours, except for transactions occurring on a Friday, which are generally processed the following Monday. All credit card transactions are
classified as cash and the amounts due from these transactions totaled $2.1 million at December 31, 2009 and $2.2 million at December 31,
2008.
Book overdrafts of $0.7 million and $4.2 million as of December 31, 2009 and 2008, respectively, represent checks issued that had not
been presented for payment to the banks and are classified as accounts payable in the Company's consolidated balance sheet. The Company
typically funds these overdrafts through normal collections of funds or transfers from bank balances at other financial institutions. Under the
terms of the Company's facilities with its banks, the respective financial institutions are not legally obligated to honor the book overdraft
balances as of December 31, 2009 and 2008, or any balance on any given date.
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