Urban Outfitters 2012 Annual Report Download - page 30

Table of Contents
Statements of Income. Unrealized gains and losses on these securities are considered temporary and therefore are excluded from earnings and are reported in
accumulated other comprehensive loss in shareholders' equity until realized. Other than temporary impairment losses related to credit losses are considered to
be realized losses. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to determine the realized gain or
loss. Securities classified as current assets have maturity dates of less than one year from the balance sheet date. Securities classified as non-current assets
have maturity dates greater than one year from the balance sheet date. Available-for-sale securities such as auction rate securities that fail at auction and do
not liquidate in the normal course are classified as non-current assets.
Inventories
We value our inventories, which consist primarily of general consumer merchandise held for sale, at the lower of cost or market. Cost is determined on
the first-in, first-out method and includes the cost of merchandise and import related costs, including freight, import taxes and agent commissions. A periodic
review of inventory is performed in order to determine if inventory is properly stated at the lower of cost or market. Factors related to current inventories such
as future expected consumer demand and fashion trends, current aging, current and anticipated retail markdowns or wholesale discounts and class or type of
inventory are analyzed to determine estimated net realizable value. Criteria that we utilize to quantify aging trends includes factors such as average selling
cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost during the average selling cycle and the value and nature of
merchandise currently priced below original cost. A provision is recorded to reduce the cost of inventories to the estimated net realizable values, if
appropriate. The majority of inventory at January 31, 2012 and 2011 consisted of finished goods. Unfinished goods and work-in-process were not material to
the overall net inventory value. Net inventories as of January 31, 2012 and January 31, 2011 totaled $250.1 million and $229.6 million, representing 16.9%
and 12.8% of total assets, respectively. Any significant unanticipated changes in the risk factors noted within this report could have a significant impact on the
value of our inventories and our reported operating results.
Adjustments to provisions related to the net realizable value of our inventories are primarily based on the market value of our physical inventories,
cycle counts and recent historical trends. Our physical inventories for fiscal 2012 were performed as of June 2011 and January 2012. Our estimates generally
have been accurate and our reserve methods have been applied on a consistent basis. We expect the amount of our reserves to increase over time as we expand
our store base and accordingly, related inventories.
Long-Lived Assets
Our long-lived assets consist principally of store leasehold improvements, buildings and furniture and fixtures, and are included in the "Property and
equipment, net" line item in our consolidated balance sheets included in this report. Store leasehold improvements are recorded at cost and are amortized
using the straight-line method over the lesser of the applicable store lease term, including lease renewals which are reasonably assured, or the estimated useful
life of the leasehold improvements. The typical initial lease term for our stores is ten years. Buildings are recorded at cost and are amortized using the straight-
line method over 39 years. Furniture and fixtures are recorded at cost and are amortized using the straight-line method over their useful life, which is typically
five years. Net property and equipment as of January 31, 2012 and January 31, 2011 totaled $685.0 million and $586.3 million, respectively, representing
46.2% and 32.7% of total assets, respectively.
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