Kroger 2015 Annual Report Download - page 110

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A-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENT S
All amounts in the Notes to Consolidated Financial Statements are in millions except per share amounts.
1. ACCOUNTING POLICIES
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 30, 2016, the Company was one of the largest retailers in the nation 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 in which the Company is the primary beneficiary. Significant
intercompany transactions and balances have been eliminated.
On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of The
Kroger Co.’s common shares in the form of a 100% stock dividend, which was effective July 13, 2015.
All share and per share amounts in the Company’s Consolidated Financial Statements and related notes
have been retroactively adjusted to reflect the stock split for all periods presented.
Refer to Note 17 for an additional change to the Consolidated Balance Sheets for a recently adopted
accounting standard regarding the presentation of debt issuance costs.
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 30, 2016, January 31, 2015 and February 1, 2014.
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 is also required. Actual results could differ from those estimates.
Cash, Temporary Cash Investments and Book Overdrafts
Cash and temporary cash investments represent store cash and short-term investments with
original maturities of less than three months. Book overdrafts are included in “Trade accounts payable”
and “Accrued salaries and wages” in the Consolidated Balance Sheets.
Deposits In-Transit
Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end
of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to
which the Company does not have immediate access but settle within a few days of the sales transaction.
Inventories
Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market.
In total, approximately 95% of inventories in 2015 and 2014 were valued using the LIFO method. Cost
for the balance of the inventories, including substantially all fuel inventories, was determined using the
first-in, first-out (“FIFO”) method. Replacement cost was higher than the carrying amount by $1,272 at
January 30, 2016 and $1,245 at January 31, 2015. The Company follows the Link-Chain, Dollar-Value
LIFO method for purposes of calculating its LIFO charge or credit.