Best Buy 2002 Annual Report Download - page 41

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Notes to Consolidated Financial Statements 39
$ in millions, except per share amounts
1. Summary of Significant Accounting
Policies
Description of Business
Best Buy Co., Inc. is North America’s No. 1 specialty
retailer of name-brand consumer electronics, home office
equipment, entertainment software and appliances. We
operate three segments: Best Buy, Musicland and
International. Best Buy is a specialty retailer of consumer
electronics, home office equipment, entertainment
software and appliances comprised of 481 stores in 44
states. Also included in the Best Buy segment is Seattle-
based Magnolia Hi-Fi, a high-end retailer of audio and
video products with 13 stores. Musicland, with more than
1,320 locations in the United States, Puerto Rico and the
U.S. Virgin Islands, is primarily a mall-based retailer of
prerecorded music, movies and other entertainment-
related products. International is comprised of Future
Shop, which currently operates 95 stores and is Canada’s
largest consumer electronics retailer, offering products
similar to Best Buy.
Basis of Presentation
The consolidated financial statements include the accounts
of Best Buy Co., Inc. and its subsidiaries. Significant
intercompany accounts and transactions have been
eliminated. All subsidiaries are wholly owned.
Use of Estimates in the Preparation of
Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires us to
make estimates and assumptions. These estimates and
assumptions affect the reported amounts in the consolidated
balance sheets and statements of earnings, as well as the
disclosure of contingent liabilities. Actual results could
differ from these estimates and assumptions.
Fiscal Year
Our fiscal year ends on the Saturday nearest the end of
February. Fiscal 2002 and 2000 each included 52
weeks, while fiscal 2001 included 53 weeks.
Cash and Cash Equivalents
We consider highly liquid investments with a maturity
of three months or less when purchased to be cash
equivalents. These investments are carried at cost, which
approximates market value.
Recoverable Costs From
Developed Properties
The costs of acquisition and development of properties
that we intend to sell and lease back or recover from
landlords within one year are included in current assets.
Merchandise Inventories
Merchandise inventories are recorded at the lower of cost
or market. The primary methods used to determine cost are
the average cost and retail inventory methods.
Property and Equipment
Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method
over the estimated useful lives of the assets or, in the case
of leasehold improvements, over the shorter of the estimated
useful lives or lease terms. When indicators of impairment
exist, we evaluate long-lived assets for impairment using
an undiscounted cash flow analysis.
Estimated useful lives by major asset category are as follows:
Asset Life (in years)
Buildings 30–40
Leasehold improvements 10 –20
Fixtures and equipment 3–15
Property under capital lease 5–20
Notes to Consolidated Financial Statements