Staples 2003 Annual Report Download - page 71

STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE A Summary of Significant Accounting Policies (Continued)
When the Company sells receivables under the receivables securitization agreement, the discount from the face
amount of accounts receivable sold approximates the cost that Staples, selling to third party purchasers, would incur if it
were to issue commercial paper backed by these accounts receivable. The discount is accounted for as a loss on the sale
of receivables and has been included in interest and other expense in the Consolidated Statements of Income. This
discount totaled $1.0 million in fiscal year 2002 and $2.0 million in fiscal year 2001. Due to the short-term nature of the
non-interest bearing receivables sold, changes to the key assumptions would not materially impact the recorded loss on
the sale of receivables.
Private Label Credit Card: Staples offers a private label credit card which is managed by a financial services
company. Under the terms of the agreement, Staples is obligated to pay fees which approximate the financial institution’s
cost of processing and collecting the receivables, which are primarily non-recourse to Staples.
Investments: Investments, except those which are consolidated, are classified as ‘‘available for sale’’ under the
provisions of SFAS No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities.’’ Accordingly,
investments are reported at fair value, if fair value can be determined; otherwise, the investment is reported at cost.
Fluctuations in the fair value of investments are included as a separate component of stockholders’ equity, net of
applicable taxes. The Company classifies investments with an original maturity of less than one year, or which it intends
to sell within one year, as current assets. Equity investments included in other current assets totaled $5.0 million as of
February 1, 2003 and February 2, 2002.
Property and Equipment: Property and equipment are recorded at cost. Expenditures for normal maintenance and
repairs are charged to expense as incurred. Depreciation and amortization, which includes the amortization of assets
recorded under capital lease obligations, are provided using the straight-line method over the estimated useful lives of
the assets or the terms of the respective leases. Depreciation and amortization periods are as follows:
Buildings ............................ 40 years
Leasehold improvements ................. 10 to 15 years or term of lease
Furniture and fixtures ................... 5 to 10 years
Equipment ........................... 3 to 10 years
Lease Acquisition Costs: Lease acquisition costs are recorded at cost and amortized using the straight-line method
over the respective lease terms, including option renewal periods if renewal of the lease is probable, which range from 5
to 40 years. Accumulated amortization at February 1, 2003 and February 2, 2002 totaled $46.8 million and $40.7 million,
respectively.
Goodwill and Intangible Assets: The Company adopted Statement of Financial Accounting Standards No. 142,
‘‘Accounting for Goodwill and Other Intangible Assets’’ (‘‘SFAS No. 142’’), on February 3, 2002. SFAS No. 142 requires
that goodwill and intangible assets that have indefinite lives not be amortized but, instead, tested at least annually for
impairment. Accordingly, the Company ceased amortization of all goodwill on February 3, 2002. Management uses a
discounted cash flow analysis which requires that certain assumptions and estimates be made regarding industry
economic factors and future profitability of acquired businesses to assess the need for an impairment charge. The
Company has elected the fourth quarter to complete its annual impairment test. As a result of the fourth quarter
impairment analysis, management has determined that no impairment charge is required. Goodwill arising from business
acquisitions was previously amortized on a straight-line basis over periods ranging from 20 to 40 years.
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