OfficeMax 2007 Annual Report Download - page 54

assets; facility closure reserves and environmental liabilities; and assets and obligations related to
employee benefits.
Foreign Currency Translation
Local currencies are considered the functional currencies for the Company’s operations outside
the United States. Assets and liabilities of foreign operations are translated into U.S. dollars at the
rate of exchange in effect at the balance sheet date with the related translation adjustments
reported in stockholders’ equity as a component of accumulated other comprehensive income
(loss). Revenues and expenses are translated into U.S. dollars at average monthly exchange rates
prevailing during the year. Foreign currency transaction gains and losses related to assets and
liabilities that are denominated in a currency other than the functional currency are reported in the
Consolidated Statements of Income (Loss) in the period they occur.
Revenue Recognition
Revenue from the sale of products is recognized at the time both title and the risk of ownership
are transferred to the customer, which generally occurs upon delivery to the customer or third-party
delivery service for contract, catalog and Internet sales, and at the point of sale for retail
transactions. Service revenue is recognized as the services are rendered. Revenue is reported less
an appropriate provision for returns and net of coupons, rebates and other sales incentives.
Revenue from transactions in which the Company acts as an agent or broker is reported on a
commission basis. Revenue from the sale of extended warranty contracts is reported on a
commission basis at the time of sale, except in a limited number of states where state law specifies
the Company as the legal obligor. In such states, the revenue from the sale of extended warranty
contracts is recorded at the gross amount and recognized ratably over the contract period. The
performance obligations and risk of loss associated with extended warranty contracts sold by the
Company are assumed by an unrelated third party. Costs associated with these contracts are
recognized in the same period as the related revenue.
Fees for shipping and handling charged to customers in connection with sale transactions are
included in sales. Costs related to shipping and handling are included in cost of goods sold and
occupancy costs. Taxes collected from customers are accounted for on a net basis and are
excluded from sales.
Cash and Cash Equivalents
Cash equivalents includes short-term debt instruments that have an original maturity of three
months or less at the date of purchase. The Company’s banking arrangements allow the Company
to fund outstanding checks when presented to the financial institution for payment. This cash
management practice frequently results in a net cash overdraft position for accounting purposes,
which occurs when total issued checks exceed available cash balances at a single financial
institution. The Company records its outstanding checks in accounts payable—trade in the
Consolidated Balance Sheets, and the net change in overdrafts in the accounts payable—trade line
item within the cash flows from operating activities section of the Consolidated Statements of Cash
Flows.
Accounts Receivable
Accounts receivable relate primarily to amounts owed by customers for trade sales of products
and services and amounts due from vendors under volume purchase rebate, cooperative
advertising and various other marketing programs. An allowance for doubtful accounts is recorded
to provide for estimated losses resulting from uncollectible accounts, and is the Company’s best
estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
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