Albertsons 2005 Annual Report Download - page 58

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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 refer 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, except for the fourth quarter of fiscal
2004 which consisted of 13 weeks. The last three fiscal years consist of the 52-week period ending February 26,
2005, the 53-week period ending February 28, 2004, and the 52-week period ending February 22, 2003.
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.
Revenues and costs from third party logistic operations are recorded in accordance with EITF issue No.
99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent”. Generally, when the company is the
primary obligor in a transaction, is subject to inventory and/or credit risk, has latitude in establishing price and
selecting suppliers, or has several, but not all of these indicators, revenue is recorded gross. If the company is not
the primary obligor and amounts earned have little or no credit risk, the company generally records the net
amounts as management fees earned.
Cost of Sales:
Cost of sales includes cost of inventory sold during the period, including purchasing and distribution costs
and shipping and handling fees.
Advertising expenses are a component of cost of sales in the Consolidated Statement of Earnings and are
expensed as incurred. Advertising expenses were $80.8 million, $83.4 million and $83.9 million for fiscal 2005,
2004 and 2003, respectively.
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 earned, based on quantities
purchased, and new product allowances are recorded as a reduction to the cost of purchased inventory and
recognized when the related inventory is sold. 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.
Cash and Cash Equivalents:
The company considers all highly liquid investments with maturities of three months or less at the time of
purchase to be cash equivalents.
F-12