Kroger 2010 Annual Report Download - page 117

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A-37
NO T E S T O CO N S O L I D A T E D FI N A N C I A L ST A T E M E N T S
All dollar amounts are in millions except share and per share amounts.
Certain prior-year amounts have been reclassified to conform to current year presentation.
1. AC C O U N T I N G PO L I C I E S
The following is a summary of the significant accounting policies followed in preparing these financial
statements.
Description of Business, Basis of Presentation and Principles of Consolidation
The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. As of January 29,
2011, the Company was one of the largest retailers in the United States based on annual sales. The Company
also manufactures and processes food for sale by its supermarkets. The accompanying financial statements
include the consolidated accounts of the Company, its wholly-owned subsidiaries and the Variable Interest
Entities (“VIE”) in which the Company is the primary beneficiary. Significant intercompany transactions
and balances have been eliminated.
The Company reflects certain promotional allowances in its LIFO charge. During the first quarter 2010
LIFO analysis, the Company revised the LIFO reserve to reflect certain prior year promotional allowances
in prior year LIFO indices. By not including these promotional allowances in all LIFO indices, the Company
overstated its LIFO reserve for years 2007 and prior. The Company believes this correction is not material
to any individual year or any quarterly period within the years presented. As a result, the Company has
increased beginning accumulated earnings and reduced its LIFO reserve in the Consolidated Financial
Statements by $33 ($20 after-tax).
Fiscal Year
The Company’s fiscal year ends on the Saturday nearest January 31. The last three fiscal years consist
of the 52-week periods ended January 29, 2011, January 30, 2010 and January 31, 2009.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities. Disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of consolidated revenues and expenses during the reporting period
also is required. Actual results could differ from those estimates.
Cash and temporary cash investments
Cash and temporary cash investments represent store cash and Euros held to settle Euro-denominated
contracts. The Company valued its carrying amount of Euros at the spot rates as of January 29, 2011,
January 30, 2010, and January 31, 2009.
Inventories
Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market. In
total, approximately 97% of inventories for 2010 and 2009 were valued using the LIFO method. Cost for the
balance of the inventories, including substantially all fuel inventories, was determined using the first-in,