Barnes and Noble 2008 Annual Report Download - page 24

(Thousands of dollars, except per share data)
For the 52 weeks ended January 31, 2009 (fi scal 2008),
the 52 weeks ended February 2, 2008 (fi scal 2007) and
the 53 weeks ended February 3, 2007 (fi scal 2006).
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. As of January 31, 2009, the
Company operated 778 bookstores, 726 primarily under
the Barnes & Noble Booksellers trade name (hereafter
collectively referred to as Barnes & Noble stores) and
52 primarily under the B. Dalton Bookseller trade name
(hereafter collectively referred to as B. Dalton stores).
Barnes & Noble conducts the online part of its business
through barnesandnoble.com llc (Barnes & Noble.com).
The Company publishes books under its own imprints
which include the imprints of Sterling Publishing Co.,
Inc. (Sterling or Sterling Publishing). Additionally, as of
January 31, 2009, the Company owned an approximate
74% interest in Calendar Club, an operator of seasonal
kiosks. The Company subsequently sold its interest in
Calendar Club in February 2009. The results of Calendar
Club have been classifi ed as discontinued operations in
all periods presented.
Consolidation
The consolidated fi nancial statements include the
accounts of Barnes & Noble and its wholly and majority-
owned subsidiaries. Investments in affi liates in which
ownership interests range from 20% to 50%, are
accounted for under the equity method. All signifi cant
intercompany accounts and transactions have been
eliminated in consolidation. The Company consolidates
a variable interest entity in which the Company absorbs
a majority of the entity’s expected losses, receives a
majority of the entity’s expected residual returns, or
both, as a result of ownership.
Use of Estimates
In preparing fi nancial statements in conformity with
generally accepted accounting principles, the Company
is required to make estimates and assumptions that
aff ect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at
the date of the fi nancial statements and revenues and
expenses during the reporting period. Actual results
could diff er 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 on the fi rst-in, fi rst-out
(FIFO) basis. The Company uses the retail inventory
method on the FIFO basis for 97% and 98% of the
Company’s merchandise inventories as of January 31,
2009 and February 2, 2008, respectively.
Market is determined based on the estimated net
realizable value, which is generally the selling price.
Reserves for non-returnable inventory are based on
the Company’s history of liquidating non-returnable
inventory.
The Company also estimates and accrues shortage for
the period between the last physical count of inventory
and the balance sheet date. Shortage rates are estimated
and accrued based on historical rates and can be aff ected
by changes in merchandise mix and changes in actual
shortage trends.
Property and Equipment
Property and equipment are carried at cost, less accu-
mulated depreciation and amortization. For fi nancial
reporting purposes, depreciation is computed using the
straight-line method over estimated useful lives. For tax
purposes, diff erent methods are used. Maintenance and
repairs are expensed as incurred, while major mainte-
nance and 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 underly-
ing 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2008 Annual Report 23