Albertsons 2007 Annual Report Download - page 80

SU
PERVAL
U
IN
C
. and
S
ubsidiaries
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
it is possible that the accurac
y
of the estimation process could be materiall
y
impacted b
y
different
j
ud
g
ments as
to collectibility based on the information considered and further deterioration of accounts. The allowance for
l
osses on receivables was
$
28 and
$
27 in fiscal 2007 and 2006, respectively. Bad debt expense was
$
2,
$
5 and
$7
in fiscal 2007, 2006 and 200
5
, respectivel
y.
I
n
v
entor
i
es
I
nventories are valued at the lower of cost or market. Substantially all of the Company’s inventory consists of
fi
n
i
s
h
e
d
goo
d
s.
Approximately 82 percent and 6
5
percent of the Company’s inventories are valued using the last-in, first-ou
t
(
“LIFO”) method for fiscal 2007 and 200
6
, respectively. The first-in, first-out method (“FIFO”) is used t
o
d
etermine cost for some of the hi
g
hl
y
consumable inventories. If the FIFO method had been used to determin
e
cost of inventories for which the LIFO method is used, the Company’s inventories would have been higher b
y
a
pproximately
$
178 at February 24, 2007 and
$
160 at February 25, 2006
.
T
he Company uses a combination of the retail inventory method (“RIM”) and replacement cost method t
o
d
eterm
i
ne t
h
e cost o
fi
ts
i
nventory. T
h
e RIM va
l
uat
i
on o
fi
nventor
i
es
i
s at cost an
d
t
h
e gross marg
i
ns ar
e
calculated b
y
appl
y
in
g
a cost-to-retail ratio to the current retail value of inventories. The replacement cost
method utilizes the most current unit
p
urchase cost to calculate the value of inventories
.
Durin
g
fiscal 2007, 2006 and 200
5
, inventor
y
quantities in certain LIFO la
y
ers were reduced. These reductions
resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compare
d
w
ith the cost of fiscal 2007, 2006 and 2005 purchases. As a result, Cost of sales decreased by
$
6,
$
7 and
$
11 i
n
f
iscal 2007, 2006 and 200
5
, respectivel
y
.
Th
e Company eva
l
uates
i
nventory s
h
ortages t
h
roug
h
out t
h
e year
b
ase
d
on actua
l
p
h
ys
i
ca
l
counts
i
n
i
ts
f
ac
ili
t
i
es.
Allowances for inventor
y
shorta
g
es are recorded based on the results of these counts to provide for estimated
shortages as of the financial statement date
.
Reserves for C
l
ose
d
Properties an
d
Asset Impairment C
h
arge
s
Th
e Company ma
i
nta
i
ns reserves
f
or est
i
mate
dl
osses on reta
il
stores,
di
str
ib
ut
i
on ware
h
ouses an
d
ot
h
e
r
properties that are no lon
g
er bein
g
utilized in current operations. The Compan
y
provides for closed propert
y
o
perating lease liabilities using a discount rate to calculate the present value of the remaining noncancellable
l
ease payments a
f
ter t
h
ec
l
os
i
ng
d
ate, net o
f
est
i
mate
d
su
b
tenant
i
ncome. T
h
ec
l
ose
d
property
l
ease
li
a
bili
t
i
e
s
u
suall
y
are paid over the remainin
g
lease terms, which
g
enerall
y
ran
g
e from one to 26
y
ears. The Compan
y
estimates subtenant income and future cash flows based on the Company’s experience and knowledge of th
e
mar
k
et
i
nw
hi
c
h
t
h
ec
l
ose
d
property
i
s
l
ocate
d
,t
h
e Company’s prev
i
ous e
ff
orts to
di
spose o
f
s
i
m
il
ar assets an
d
existin
g
economic conditions
.
Owne
d
propert
i
es an
d
cap
i
ta
ll
ease propert
i
es t
h
at are c
l
ose
d
are re
d
uce
d
to t
h
e
i
r est
i
mate
df
a
i
rva
l
ue. Re
d
uct
i
o
n
in the carr
y
in
g
values of propert
y
, equipment and leasehold improvements are reco
g
nized when expected net
f
uture cash flows are less than the assets’ carrying value. The Company estimates net future cash flows based o
n
i
ts exper
i
ence an
dk
now
l
e
d
ge o
f
t
h
e mar
k
et
i
nw
hi
c
h
t
h
ec
l
ose
d
property
i
s
l
ocate
d
an
d
,w
h
en necessary, ut
ili
zes
l
ocal real estate brokers
.
A
dj
ustments to c
l
ose
d
property reserves pr
i
mar
il
yre
l
ate to c
h
anges
i
nsu
b
tenant
i
ncome or actua
l
ex
i
t cost
s
d
ifferin
g
from ori
g
inal estimates. Ad
j
ustments are made for chan
g
es in estimates in the period in which the
changes become known
.
F-
14