Ross 2010 Annual Report Download - page 38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Summary of Signifi cant Accounting Policies
Business. Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of fi rst-quality, in-season, name brand
and designer apparel, accessories, footwear, and home fashions for the entire family. At the end of fi scal 2010, the Company
operated 988 Ross Dress for Less® (“Ross”) locations in 27 states and Guam and 67 dd’s DISCOUNTS® stores in six states, all of
which are supported by four distribution centers. The Company’s headquarters, one buying offi ce, two distribution centers, and
26% of its stores are located in California.
Segment reporting. The Company has one reportable segment. The Company’s operations include only activities related to
off-price retailing in stores throughout the United States.
Basis of presentation and fi scal year. The consolidated fi nancial 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 fi scal calendar and utilizes a 52-53 week fi scal year whereby the fi scal year ends on the Saturday
nearest to January 31. The fi scal years ended January 29, 2011, January 30, 2010 and January 31, 2009 are referred to as fi scal
2010, fi scal 2009, and fi scal 2008, respectively, and had 52 weeks.
Use of accounting estimates. The preparation of consolidated fi nancial 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
fi nancial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates. The Company’s signifi cant accounting estimates include valuation reserves for inventory shortage,
packaway inventory costs, useful lives of fi xed assets, self-insurance reserves, and uncertain tax position reserves.
Purchase obligations. As of January 29, 2011, the Company had purchase obligations of approximately $1,332 million.
These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to store fi xtures
and supplies, and information technology service and maintenance contracts. Merchandise inventory purchase orders of
$1,250 million represent purchase obligations of less than one year as of January 29, 2011.
Cash and cash equivalents. Cash equivalents consist of highly liquid, fi xed 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 29, 2011 and January 30, 2010,
these investments were classifi ed as available-for-sale and are stated at fair value. Investments are classifi ed as either short- or
long-term based on their original maturities and the Company’s intent. Investments with an original maturity of less than one year
are classifi ed 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 47% and 38% of total inventories as of January 29, 2011 and January 30,
2010. Merchandise inventory includes acquisition, processing, and storage costs related to packaway inventory. 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.