The Gap 2008 Annual Report Download - page 53

Notes to Consolidated Financial Statements
For the Fiscal Years Ended January 31, 2009, February 2, 2008, and February 3, 2007
Note 1. Summary of Significant Accounting Policies
Organization
The Gap, Inc., a Delaware Corporation, is a global specialty retailer offering clothing, accessories, and personal care
products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta
brands. We operate stores in the United States, Canada, the United Kingdom, France, Ireland, and Japan, while our
independent third-party franchisees own and operate stores in Asia, Europe, Latin America, and the Middle East
under the Gap and Banana Republic brand names. Our U.S. customers can shop online at www.gap.com,
www.oldnavy.com, www.bananarepublic.com, www.piperlime.com, and www.athleta.com.
In September 2008, we acquired all of the outstanding capital stock of Athleta, Inc. (“Athleta”), a women’s sports
and active apparel company based in Petaluma, California, for an aggregate purchase price of $148 million. See
Note 3 of Notes to Consolidated Financial Statements.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of The Gap, Inc. and its subsidiaries (the “Company,”
“we,” “our”). All intercompany transactions and balances have been eliminated.
Fiscal Year
Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31. Fiscal years ended January 31,
2009 (fiscal 2008) and February 2, 2008 (fiscal 2007) consisted of 52 weeks. Fiscal year ended February 3, 2007
(fiscal 2006) consisted of 53 weeks, and the additional week contributed approximately $200 million of net sales.
Net sales and operating expenses for the last fiscal month of fiscal 2006, which was a five-week period, were
accounted for as a regular five-week month.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents, Short-Term Investments, and Restricted Cash
Amounts in-transit from banks for customer credit card and debit card transactions that process in less than seven
days are classified as cash and cash equivalents in the Consolidated Balance Sheets. The banks process the majority
of these amounts within one to two business days.
All highly liquid investments with maturities of 91 days or less at the date of purchase are classified as cash
equivalents. Highly liquid investments with maturities greater than 91 days and less than one year at the date of
purchase are classified as short-term investments. Our short-term and cash equivalent investments are classified
as held-to-maturity based on our positive intent and ability to hold the securities to maturity. Our cash, cash
equivalents, and short-term investments are placed primarily in treasury and prime money market funds, domestic
commercial paper, and bank securities. Our cash equivalents and short-term investments are stated at amortized
cost, which approximates fair market value due to the short maturities of these instruments. Income related to
these securities is reported as a component of interest income in the Consolidated Statements of Earnings.
41