Banana Republic 2005 Annual Report Download - page 44

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42 gap inc. 2005 annual report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the 52 Weeks Ended January 28, 2006 (Fiscal 2005), January 29, 2005 (Fiscal 2004), and January 31, 2004 (Fiscal 2003).
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Gap Inc. (the “Company,” “we,” “our”), a Delaware Corporation, is a global specialty retailer selling casual apparel, accessories and personal
care products for men, women and children under a variety of brand names including Gap, Banana Republic, Old Navy, and Forth & Towne. Our
principal markets consist of the United States, Canada, Europe and Japan, with the United States being the most significant. We sell our products
through traditional retail stores, outlet stores and through our web sites.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have
been eliminated.
Translation adjustments result from translating foreign subsidiaries’ financial statements into U.S. dollars. Balance sheet accounts are translated at
exchange rates in effect at the balance sheet date. Income statement accounts are translated at average exchange rates during the year. The result-
ing translation adjustments are included in accumulated other comprehensive earnings in the Consolidated Statements of Shareholders’ Equity.
Fiscal Year
Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31. Fiscal 2005, 2004 and 2003 all consisted of 52 weeks. Fiscal
2006 will consist of 53 weeks.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires manage-
ment 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.
Reclassifications
We have reclassified $23 million of cash provided by operating activities to cash provided by investing activities related to the non-cash portion of
property and equipment purchases for fiscal 2004 in our Consolidated Statements of Cash Flows. This reclassification had no effect on the net de-
crease in cash and equivalents or on net earnings, as previously reported.
Cash and Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less. Amounts in-transit
from banks for customer credit card, debit card and electronic benefit transfer transactions that process in less than seven days are classified as cash
and equivalents in our Consolidated Balance Sheets. The banks process the majority of these amounts within one to two business days. Outstanding
checks classified in accounts payable on the Consolidated Balance Sheets totaled $67 million and $70 million as of the end of fiscal 2005 and 2004,
respectively.
Short-term Investments
We have short-term investments, which generally have maturities of more than three months and less than one year from the date of purchase. Our
short-term investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. Primarily all secu-
rities held are U.S. government and agency securities and bank certificates of deposit and are stated at amortized cost, which approximates fair
market value. Income related to these securities is reported as a component of interest income.
The tables below summarize our marketable securities as of January 28, 2006 and January 29, 2005, which are recorded as cash and equivalents on
the Consolidated Balance Sheets, and our short-term investments: