Banana Republic 2006 Annual Report Download - page 57

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The following table summarizes the fair value of cash and held-to-maturity securities held in our investment
portfolio, recorded as cash and cash equivalents, and short-term investments.
($ in millions)
February 3,
2007
January 28,
2006
Cash .......................................................................... $1,044 $ 831
U.S. Treasury and agency securities .................................................. 308 438
U.S. corporate securities ........................................................... 578 660
Foreign securities ................................................................ 100 106
Total cash equivalents (original maturity of 91 days or less) ............................... 986 1,204
Total cash and cash equivalents ................................................. $2,030 $2,035
U.S. Treasury and agency securities .................................................. $ 366 $ 818
U.S. corporate securities ........................................................... 204 134
Total short-term investments (original maturity of greater than 91 days) ................. $ 570 $ 952
Restricted cash primarily represents cash that serves as collateral for our insurance obligations and other
cash that is restricted from withdrawal for use. As of February 3, 2007 and January 28, 2006, restricted cash
represents the restriction of $44 million and $55 million, respectively.
Hedging Instruments
We apply Statement of Financial Accounting Standards No. (“SFAS”) 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended, which establishes the accounting and reporting standards for
derivative instruments and hedging activities. We recognize derivative instruments as either other current assets
or accrued expenses and other current liabilities in our Consolidated Balance Sheets and measure those
instruments at fair value. See Note 6 of Notes to the Consolidated Financial Statements.
Merchandise Inventory
In fiscal 2005, we implemented a new inventory system and effective January 29, 2006 (the beginning of
fiscal 2006), we changed our inventory flow assumption from the first-in, first-out (“FIFO”) method to the
weighted average cost method (“WAC”). The change in inventory accounting method did not have a material
impact on the fiscal 2006 financial statements and, because the effect on prior periods presented is not material,
they have not been restated as would be required by SFAS 154.
We review our inventory levels in order to identify slow-moving merchandise and broken assortments
(items no longer in stock in a sufficient range of sizes) and use markdowns to clear merchandise. We value
inventory at the lower of cost or market and record a reserve when future estimated selling price is less than cost.
In addition, we estimate and accrue shortage for the period between the last physical count and the balance sheet
date. Our shortage estimate can be affected by changes in merchandise mix and changes in actual shortage trends.
We estimate and accrue shortage for the period between the last physical count and the balance sheet date. Our
shortage estimate can be affected by changes in merchandise mix and changes in actual shortage trends.
Property and Equipment
Property and equipment are stated at cost and consist of the following:
($ in millions)
February 3,
2007
January 28,
2006
Leasehold improvements .......................................................... $2,926 $ 2,742
Furniture and equipment ........................................................... 2,487 2,532
Land and buildings ............................................................... 1,005 1,008
Software ....................................................................... 594 596
Construction-in-progress .......................................................... 123 80
Property and equipment, gross ...................................................... 7,135 6,958
Less: Accumulated depreciation ..................................................... (3,938) (3,712)
Property and equipment, net of accumulated depreciation ................................. $3,197 $ 3,246
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