Ross 2008 Annual Report Download - page 38

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36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Summary of Significant Accounting Policies
Business. Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of first-quality, name brand apparel,
shoes and accessories for the entire family, as well as gift items, linens and other home-related merchandise. At the end of fiscal
2008, the Company operated 904 Ross Dress for Less® (“Ross”) locations in 27 states and Guam and 52 dd’s DISCOUNTS®
stores in four states, which are supported by four distribution centers. The Company’s headquarters, two distribution centers
and 26% of its stores are located in California.
Basis of presentation and fiscal year. The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Intercompany transactions and accounts have been eliminated. The Company
follows the National Retail Federation fiscal calendar and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the
Saturday nearest to January 31. The fiscal years ended January 31, 2009, February 2, 2008 and February 3, 2007 are referred
to as fiscal 2008, fiscal 2007 and fiscal 2006, respectively. Fiscal 2006 was 53 weeks. Fiscal 2008 and 2007 were 52 weeks.
Use of accounting estimates. The preparation of consolidated financial statements in conformity with Generally Accepted
Accounting Principles in the United States of America (“GAAP”) requires the Company to make estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The Company’s significant accounting estimates include valuation of merchandise inventory
and long-lived assets, and accruals for self-insurance.
Purchase obligations. As of January 31, 2009, the Company had purchase obligations of approximately $621.1 million.
These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to store fixtures
and supplies, and information technology service and maintenance contracts. Merchandise inventory purchase orders of
$574.0 million represent purchase obligations of less than one year as of January 31, 2009.
Cash and cash equivalents. Cash and cash equivalents are highly liquid, fixed income instruments purchased with an
original maturity of three months or less.
Investments. The Company’s investments are comprised of various debt securities. At January 31, 2009 and February 2,
2008, these investments were classified as available-for-sale and are stated at fair value. Investments are classified as either
short-term or long-term based on their original maturities. Investments with an original maturity of less than one year are
classified as short-term. See Note B for additional information.
Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted average basis)
or net realizable value. The Company purchases manufacturer overruns and canceled orders both during and at the end of a
season which are referred to as “packaway” inventory. Packaway inventory is purchased with the intent that it will be stored
in the Company’s warehouses until a later date, which may even be the beginning of the same selling season in the following
year. Packaway inventory accounted for approximately 38% of total inventories as of January 31, 2009 and February 2, 2008.
The cost of the Company’s merchandise inventory is reduced by valuation reserves for shortage based on historical shortage
experience from the Company’s physical merchandise inventory counts and cycle counts.
Cost of goods sold. In addition to product costs, the Company includes in cost of goods sold its buying, distribution and
freight expenses as well as occupancy costs, and depreciation and amortization related to the Company’s retail stores, buying
and distribution facilities. Buying expenses include costs to procure merchandise inventories. Distribution expenses include the
cost of operating the Company’s distribution centers.