Albertsons 2003 Annual Report Download - page 45

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated. References to the company refers to
SUPERVALU INC. and Subsidiaries.
Fiscal Year:
The company’s fiscal year ends on the last Saturday in February. The company’s first quarter consists of
16 weeks, while the second, third and fourth quarters each consist of 12 weeks. The last three fiscal years consist
of the 52-week periods ending February 22, 2003, February 23, 2002 and February 24, 2001, respectively.
Revenue and Income Recognition:
Revenues and income from product sales are recognized at the point of sale for retail food and upon
shipment of the product for food distribution. Revenues and income from services rendered are recognized
immediately after such services have been provided.
The company provides certain facilitative services between its independent retailers and vendors related to
products typically known as Direct Store Delivery (DSD) products. These services include sourcing, invoicing
and payment services. Prior to the fourth quarter of fiscal 2003, the amounts invoiced to independent retailers by
the company for facilitative services were recorded as net sales and the related amounts due and paid by the
company to its vendors were recorded as cost of sales. Commencing with the fourth quarter of fiscal 2003, the
company has revised amounts previously reported by reclassifying cost of sales against net sales for all prior
periods. The effect is to present the net gross margin associated with such facilitative services as a component of
net sales. This reclassification had no impact on gross profit, earnings before income taxes, net earnings, cash
flows, or financial position for any period or their respective trends.
(In thousands)
February 22, 2003
(52 weeks)
February 23, 2002
(52 weeks)
February 24, 2001
(52 weeks)
Amounts invoiced to independent retailers $663,832 $630,363 $690,221
Amounts due and paid to vendors 649,312 615,482 673,895
Net gross margin $ 14,520 $ 14,881 $ 16,326
Cost of Sales:
Cost of sales includes cost of inventory sold during the period, including purchasing and distribution costs
and shipping and handling fees.
The company receives allowances and credits from suppliers for volume incentives, promotional allowances
and, to a lesser extent, new product introductions which are typically based on contractual arrangements covering
a period of one year or less. Volume incentives and promotional allowances that are earned based on quantities
purchased are recognized as a reduction to the cost of inventory. Promotional allowances that are based on the
sell-through of products are recognized as a reduction of cost of sales when the products are sold for which the
promotional allowances are given. New product introduction allowances compensate the company for costs
incurred associated with product handling and are recognized in cost of sales when the product is first stocked,
which is generally when all related expenses have been incurred.
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