Staples 2006 Annual Report Download - page 111

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STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
C-7
NOTE A Summary of Significant Accounting Policies
Nature of Operations: Staples, Inc. and subsidiaries (“Staples” or the “Company”) pioneered the office products
superstore concept and Staples is a leading office products company. Staples operates three business segments: North
American Retail, North American Delivery and International Operations. The Company’s North American Retail
segment consists of the U.S. and Canadian business units that operate office products stores. The North American
Delivery segment consists of the U.S. and Canadian business units that sell and deliver office products and services
directly to customers, and includes Staples Business Delivery, Quill and the Company’s Contract operations (Staples
National Advantage and Staples Business Advantage). The International Operations segment consists of operating units
that operate office products stores and that sell and deliver office products and services directly to customers in 19
countries in Europe, South America and Asia.
Basis of Presentation: The consolidated financial statements include the accounts of Staples, Inc. and its wholly and
majority owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
All share and per share amounts reflect, or have been restated to reflect, the three-for-two common stock split that
was effected in the form of a common stock dividend distributed on April 15, 2005.
Fiscal Year: Staples’ fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. Fiscal year 2006
consisted of the 53 weeks ended on February 3, 2007, while fiscal years 2005 and 2004 consisted of the 52 weeks ended
January 28, 2006 and January 29, 2005, respectively.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting
principles requires management of Staples to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents: Staples considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Short-term Investments: Short-term investments, which primarily consist of market auction rate preferred stock and
debt securities and treasury securities, are classified as “available for sale” under the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”
Accordingly, the short-term investments are reported at fair value, with any related unrealized gains and losses included
as a separate component of stockholders’ equity, net of applicable taxes. Realized gains and losses and interest and
dividends are included in interest income or interest expense, as appropriate. At February 3, 2007, the available for sale
investments consisted of $334.4 million of market auction rate preferred stock and debt securities, $38.0 million of
treasury securities and $85.4 million of municipal securities, with contractual maturities ranging from February 2007
through August 2046.
Receivables: Receivables include trade receivables financed under regular commercial credit terms and other non-
trade receivables. Gross trade receivables were $511.1 million at February 3, 2007 and $444.8 million at January 28, 2006.
Concentrations of credit risk with respect to trade receivables are limited due to Staples’ large number of customers and
their dispersion across many industries and geographic regions.
An allowance for doubtful accounts has been recorded to reduce trade receivables to an amount expected to be
collectible from customers based on specific evidence as well as historical trends. The allowance recorded at February 3,
2007 and January 28, 2006 was $18.8 million and $16.4 million, respectively.
Other non-trade receivables were $228.5 million at February 3, 2007 and $148.3 million at January 28, 2006 and
consisted primarily of amounts due from vendors under various incentive and promotional programs.
Merchandise Inventories: Merchandise inventories are valued at the lower of weighted-average cost or market
value.