Barnes and Noble 1998 Annual Report Download - page 49

18
The Company periodically evaluates the recoverability of
goodwill and considers whether this goodwill should be
completely or partially written off or the amortization periods
accelerated. The Company assesses the recoverability of this
goodwill based upon several factors, including management’s
intention with respect to the acquired operations and those
operations’ projected undiscounted store-level cash flows.
Deferred Charges
Costs incurred to obtain long-term financing are amortized
over the terms of the respective debt agreements using the
straight-line method, which approximates the interest method.
Unamortized costs included in other noncurrent assets as of
January 30, 1999 and January 31, 1998 were $1,397 and $1,764,
respectively. Unamortized costs of $8,209 were included in the
extraordinary loss due to the early extinguishment of debt for
fiscal 1997. Amortization expense included in interest and
amortization of deferred financing fees is $376, $1,678 and
$1,846 during fiscal 1998, 1997 and 1996 respectively.
Revenue Recognition
Revenue from sales of the Company’s products is recog-
nized at the time of sale.
The Company sells memberships which entitle purc h a s e r s
to additional discounts. The membership re venue is deferred and
recognized as income over the twe l ve-month membership period.
Sales returns (which are not significant) are recognized at
the time returns are made.
Pre-opening Expenses
In April 1998, the Accounting Standards Executive
Committee issued Statement of Position 98-5, “Reporting on
the Costs of Start-Up Activities” (SOP 98-5). SOP 98-5 requires
an entity to expense all start-up activities, as defined, when
i n c u r red. The Company has historically amortized costs
associated with the opening of new stores over the respective
store’s first 12 months of operations. In accordance with SOP
98-5, the Company will adopt its provisions effective for the
fiscal year ending January 29, 2000, and will record a one time
non-cash charge reflecting the cumulative effect of a change in
accounting principle in the first quarter of fiscal year 1999, in an
amount estimated to be $4,500 after taxes, representing such
start-up costs capitalized as of the beginning of that fiscal year.
In addition, the Company will, on a prospective basis, expense
all such start-up costs as incurred. Excluding the one time
charge, the Company’s consolidated financial statements are
not expected to be materially affected by the adoption of
SOP 98-5.
Closed Store Expenses
Upon a formal decision to close or relocate a store, the
Company charges unrecoverable costs to expense. Such costs
include the net book value of abandoned fixtures and leasehold
improvements and a provision for future lease obligations, net
of expected sublease recoveries. Costs associated with store
closings of $1,208 during fiscal 1998 are included in selling and
a d m i n i s t r a t i ve expenses in the accompanying consolidated
statements of operations.
Net Earnings Per Common Share
Basic earnings per share is computed by dividing income
available to common shareholders by the we i g h t e d - ave r a g e
n u m ber of common shares outstanding. Diluted earnings per
s h a re reflect, in periods in which they have a dilutive effect,
the impact of common shares issuable upon exercise of
stock options.
Income Taxes
The provision for income taxes includes federal, state and
local income taxes currently payable and those deferred because
of temporary differences between the financial statement and
tax bases of assets and liabilities. The deferred tax assets and
liabilities are measured using the enacted tax rates and laws that
are expected to be in effect when the differences reverse.
Stock Options
The Company accounts for all transactions under which
employees receive shares of stock or other equity instruments in
the Company or the Company incurs liabilities to employees in
amounts based on the price of its stock in accordance with the
provisions of Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employe e s .” Generally,
compensation expense is not recognized for stock option grants.
Reporting Period
The Company’s fiscal year is comprised of 52 or 53 weeks,
ending on the Saturday closest to the last day of January. The
reporting periods ended January 30, 1999, January 31, 1998
and February 1, 1997 contained 52 weeks, 52 weeks and 53
weeks, respectively.
2. Receivables, Net
Receivables represent customer, bankcard, landlord and
other receivables due within one year as follows:
January 30, 1999 January 31, 1998
Trade accounts $ 6,743 6,628
Bankcard receivables 19,421 15,536
Receivables from landlords for
leasehold improvements 23,659 16,715
Other receivables 7,700 4,979
Total receivables, net $ 57,523 43,858
3. Debt
On Nove m ber 18, 1997, the Company obtained an
$ 8 5 0 , 0 00 five - year senior re volving credit facility (the Re vo l v i n g
C redit Facility) with a syndicate led by The Chase Manhattan
Bank. The Re volving Credit Facility refinanced an existing