Barnes and Noble 2003 Annual Report Download - page 26

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2003 Annual Report ■Barnes & Noble, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Thousands of dollars, except per share data)
For the 52 weeks ended January 31, 2004 (fiscal 2003),
52 weeks ended February 1, 2003 (fiscal 2002) and 52
weeks ended February 2, 2002 (fiscal 2001).
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 superstore strategy
through its wholly owned subsidiary Barnes & Noble
Booksellers, Inc., primarily under its Barnes & Noble
Booksellers trade name (hereafter collectively referred to as
Barnes & Noble stores) and its mall strategy through its
wholly owned subsidiary B. Dalton Bookseller, Inc.
primarily under its B. Dalton store trade name (hereafter
collectively referred to as B. Dalton stores). The Company
publishes books under its own imprints which, since
January 2003, also include Sterling Publishing Co., Inc.
(Sterling Publishing) and its various imprints. The
Company is also engaged in the online retailing of books
and other products through an approximate 73 percent
interest in barnesandnoble.com llc (Barnes & Noble.com),
as more fully described in Note 8. The Company currently
has an approximate 64 percent economic interest in
GameStop Corp., the operator of video-game and
entertainment-software stores primarily under the GameStop
trade name, and a Web site (www.gamestop.com), and
publisher of Game Informer magazine (hereafter
collectively referred to as GameStop stores). Additionally,
the Company owns an approximate 74 percent interest in
Calendar Club L.L.C. (Calendar Club), an operator of
seasonal kiosks.
Consolidation
The consolidated financial statements include the
accounts of Barnes & Noble and its wholly and
majority-owned subsidiaries. Barnes & Noble.com
reports its results based on a calendar year, and
accordingly their financial statements are consolidated
on that basis. Investments in affiliates in which
ownership interests range from 20 percent to 50
percent, 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 77 percent and 82 percent of the Company’s
merchandise inventories as of January 31, 2004 and
February 1, 2003, respectively. Merchandise inventories
of GameStop, Barnes & Noble.com, and Calendar Club
represent 19 percent and 12 percent of merchandise
inventories as of January 31, 2004 and February 1,
2003, respectively, 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 January 31, 2004 and February 1,
2003.
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 improvements and major remodeling costs are