Nordstrom 2005 Annual Report Download - page 48

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40
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Amounts in thousands except per share amounts
NOTE 7: ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
January 28, 2006 January 29, 2005
Trade receivables:
Unrestricted $32,070 $31,400
Restricted 552,671 568,062
Allowance for doubtful accounts (17,926) (19,065)
Trade receivables, net 566,815 580,397
Other 72,743 65,266
Accounts receivable, net $639,558 $645,663
Our restricted trade receivables relate to our Nordstrom private label card, which back the $300,000 Class A notes and the $150,000 variable funding
note. The unrestricted trade receivables consist primarily of our Façonnable trade receivables and accrued finance charges not yet allocated to
customer accounts.
Other accounts receivable consist primarily of credit card receivables due from third-party financial institutions and vendor rebates, which are
believed to be fully realizable as they are collected soon after they are earned.
NOTE 8: INVESTMENT IN ASSET BACKED SECURITIES – CO-BRANDED NORDSTROM VISA CREDIT CARD RECEIVABLES
The following table presents the co-branded Nordstrom VISA credit card balances and the estimated fair values of our investment in asset
backed securities.
January 28, 2006 January 29, 2005
Total face value of co-branded Nordstrom VISA credit card
principal receivables $738,947 $612,549
Securities issued by the VISA Trust:
Off-balance sheet (sold to third parties):
2002 Class A & B Notes at par value $200,000 $200,000
Amounts recorded on balance sheet:
Investment in asset backed securities at fair value 561,136 422,416
The following table presents the key assumptions we use to value the investment in asset backed securities:
January 28, 2006 January 29, 2005
Assumptions used to estimate the fair value of the
investment in asset backed securities:
Weighted average remaining life (in months) 7.6 8.1
Average annual credit losses 4.7% 6.9%
Average gross yield 17.1% 15.8%
Weighted average coupon on issued securities 5.2% 3.8%
Average monthly payment rates 8.2% 7.5%
Discount rate on investment in asset backed securities 5.9% to 11.1% 4.5% to 9.0%
The discount rate on asset backed securities represents the volatility and risk of the asset. Our discount rates consider both the current interest
rate environment and credit spreads.