Barnes and Noble 2000 Annual Report Download - page 48

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Thousands of dollars, except per share data)
For the 53 weeks ended February 3, 2001 (fiscal 2000),
52 weeks ended January 29, 2000 (fiscal 1999) and 52
weeks ended January 30, 1999 (fiscal 1998).
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Business
Barnes & Noble, Inc. (Barnes & Noble), through its
subsidiaries (collectively, the Company), is primarily
engaged in the sale of books, video games and
entertainment software products. The Company
employs two 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
(hereafter collectively referred to as Barnes & Noble
stores) and 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).
The Company is also engaged in the online retailing
of books and other products through an approximate 36
percent interest in barnesandnoble.com llc (Barnes &
Noble.com), as more fully described in Note 7. The
Company, through its acquisitions of Babbage’s Etc.
LLC (Babbage’s Etc.) and Funco, Inc. (Funco) operates
video game and entertainment software stores under the
Babbage’s, Software Etc., GameStop and FuncoLand
trade names, a Web site (gamestop.com) and Game
Informer magazine (hereafter collectively referred to as
Video Game & Entertainment Software). Additionally,
the Company owns a 72 percent interest in Calendar
Club L.L.C. (Calendar Club), an operator of seasonal
calendar kiosks.
Consolidation
The consolidated financial statements include the
accounts of Barnes & Noble and its wholly and majority-
owned subsidiaries. Investments in affiliates in which
ownership interests range from 20 percent to 50 percent,
principally Barnes & Noble.com, are accounted for under
the equity method. All significant intercompany accounts
and transactions have been eliminated in consolidation.
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 statements 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 82 percent and 83 percent of the Company’s
merchandise inventories as of February 3, 2001 and
January 29, 2000, respectively. Merchandise inventories
of Video Game & Entertainment Software stores and
Calendar Club represent 9 percent of merchandise
inventories as of February 3, 2001 and are recorded
based on the average cost method. The remaining
merchandise inventories are valued on the last-in, first-
out (LIFO) method.
If substantially all of the merchandise inventories
currently valued at LIFO costs were valued at current
costs, merchandise inventories would remain unchanged
as of February 3, 2001 and January 29, 2000.
Property and Equipment
Property and equipment are carried at cost, less
accumulated 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 lease terms of the underlying
leases. 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.