Barnes and Noble 1998 Annual Report Download - page 48

17
N OTES TO CONSOLI DATED FI NANCI AL STAT E M E N T S
For the 52 weeks ended January 30, 1999 (fiscal 1998), the
52 weeks ended January 31, 1998 (fiscal 1997) and the 53 weeks
ended February 1, 1997 (fiscal 1996).
(In thousands of dollars, except per share data)
1. Summary of Significant Accounting Policies
Business
Barnes & Noble, Inc. (Barnes & Noble), through its wholly
owned subsidiaries (collectively, the Company), is primarily
engaged in the sale of books through three principal bookselling
strategies: its “super” store strategy through its wholly owned
subsidiary Barnes & Noble Booksellers, Inc., under its Barnes &
Noble Booksellers, Bookstop and Bookstar trade names (here-
after collectively referred to as Barnes & Noble stores), its mall
strategy through its wholly owned subsidiaries B. Dalton
Bookseller, Inc. and Doubleday Book Shops, Inc., under its
B. Dalton stores, Doubleday Book Shops and Scribner’s
Bookstore trade names (hereafter collectively referred to as
B. Dalton stores), and its direct-mail strategy through its wholly
owned subsidiary Marboro Books Corp. The Company is also
e n gaged in the online retailing of books and other
products through a 50% interest in barnesandnoble.com llc
(barnesandnoble.com), as more fully described in Note 5.
The Company’s interest in barnesandnoble.com is through its
wholly owned subsidiary B&N.com Holding Corp.
Consolidation
The consolidated financial statements include the accounts
of Barnes & Noble and its wholly owned subsidiaries.
Investments in affiliates that are 20% to 50% owned, principally
b a rnesandnoble.com, are accounted for using the equity
method. The Company’s investment in barnesandnoble.com
has been presented in the accompanying consolidated financial
statements under the equity method as of the be ginning of fiscal
1998 and as a consolidated wholly owned subsidiary for all of
fiscal 1997. All significant interc o m p a ny accounts and transactions
h ave been eliminated in consolidation. Certain prior-period
amounts have been reclassified for comparative purposes.
Use of Estimates
In preparing financial statements in conformity with
generally accepted accounting principles, the Company is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial state-
ments and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term, highly liquid
instruments purchased with an original maturity of three
months or less to be cash equivalents.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or
market. Cost is determined primarily by the retail inventory
method on the first-in, first-out (FIFO) basis for 86% and 83%
of the Company’s merchandise inventories as of January 30,
1999 and January 31, 1998, respectively. The remaining mer-
chandise inventories are valued on the last-in, first-out (LIFO)
method.
If substantially all of the merchandise inventories curre n t l y
valued at LIFO costs we re valued at current costs, merchandise
i nventories would remain unchanged as of January 30, 1999, and
would have increased approximately $5,102 as of January 31 ,19 98 .
Property and Equipment
Property and equipment are carried at cost, less accumu-
lated depreciation and amortization. For financial reporting
purposes, depreciation is computed using the straight-line
method over estimated useful lives. For tax purposes, different
methods are used. Maintenance and repairs are expensed as
incurred, while betterments and major remodeling costs are
capitalized. Leasehold improvements are capitalized and
amortized over the shorter of their estimated useful lives or the
terms of the respective leases. Capitalized lease acquisition costs
are being amortized over the average lease terms of the under-
lying leases. In March 1998, the Accounting Standard s
E x e c u t i ve Committee issued Statement of Position 98- 1 ,
“Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use” (SOP 98-1). This statement is effec-
tive for the Company’s fiscal year ending January 29, 2000.
Adoption is not expected to have a material effect on the
Company’s consolidated financial statements as the Company’s
policies are substantially in compliance with SOP 98-1. Costs
incurred in purchasing management information systems are
capitalized and included in property and equipment. These
costs are amortized over their estimated useful lives from the
date the systems become operational.
Intangible Assets and Amortization
The costs in excess of net assets of businesses acquired are
carried as intangible assets, net of accumulated amortization, in
the accompanying consolidated balance sheets. T he net
intangible assets, consisting primarily of goodwill and trade
names, of $59,365 and $27,615 as of January 30, 1999, and
$61,484 and $28,753 as of January 31, 1998, are amortized over
40 years using the straight-line method.
Amortization of goodwill and trade names included in
depreciation and amortization in the accompanying consol-
idated statements of operations is $3,257, $3,257 and $3,305
during fiscal 1998, 1997 and 1996, respectively. Accumulated
amortization at January 30, 1999 and January 31, 1998 was
$44,551 and $41,294, respectively.