Pep Boys 2008 Annual Report Download - page 106

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2009, February 2, 2008 and February 3, 2007
(dollar amounts in thousands, except share data)
CASH AND CASH EQUIVALENTS Cash equivalents include all short-term, highly liquid
investments with an initial maturity of three months or less when purchased. All credit and debit card
transactions that settle in less than seven days are also classified as cash and cash equivalents.
PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight-line method over the following estimated useful lives:
building and improvements, 5 to 40 years, and furniture, fixtures and equipment, 3 to 10 years.
Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and
accumulated depreciation are eliminated and the gain or loss, if any, is included in the determination
of net income. The Company reviews long-lived assets for impairment annually or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.
Property and equipment information follows:
January 31, February 2,
2009 2008
Property and Equipment—at cost:
Land ........................................... 207,608 213,962
Buildings and improvements .......................... 822,950 858,699
Furniture, fixtures and equipment ...................... 685,707 699,303
Construction in progress ............................. 2,576 3,992
1,718,841 1,775,956
Less accumulated depreciation and amortization ............ 978,510 995,177
Total Property and Equipment—Net .................... 740,331 780,779
SOFTWARE CAPITALIZATION The Company, in accordance with AICPA Statement of Position
98-1, ‘‘Accounting for the Costs of Computer Software Developed or Obtained for Internal Use’’,
capitalizes certain direct development costs associated with internal-use software, including external
direct costs of material and services, and payroll costs for employees devoting time to the software
projects. These costs are amortized over a period not to exceed five years beginning when the asset is
substantially ready for use. Costs incurred during the preliminary project stage, as well as maintenance
and training costs are expensed as incurred.
REVENUE RECOGNITION The Company recognizes revenue from the sale of merchandise at
the time the merchandise is sold. Service revenues are recognized upon completion of the service. The
Company records revenue net of an allowance for estimated future returns. The Company establishes
reserves for sales returns and allowances based on current sales levels and historical return rates.
Return activity is immaterial to revenue and results of operations in all periods presented. Gift cards
are recorded as deferred revenue until redeemed for product or services. The Company does not
record any revenue from cards which are never utilized by customers.
SALES TAXES The Company presents sales net of sales taxes in its consolidated statements of
operations.
ACCOUNTS RECEIVABLE Accounts receivable are primarily comprised of amounts due from
commercial customers. The Company records an allowance for doubtful accounts based upon an
evaluation of the credit worthiness of its customers. The allowance is reviewed for adequacy at least
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