Best Buy 2008 Annual Report Download - page 79

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$ in millions, except per share amounts or as otherwise noted
record a tax benefit for uncertain tax positions using the component of shareholders’ equity in accumulated other
highest cumulative tax benefit that is more-likely-than-not to be comprehensive income. Gains and losses from foreign
realized. A number of years may elapse before a particular currency transactions, which are included in SG&A, have not
matter, for which we have established a liability, is audited and been significant.
effectively settled. We adjust our liability for unrecognized tax
benefits in the period in which we determine the issue is Fair Value of Financial Instruments
effectively settled with the tax authorities, the statute of The carrying amount of cash and cash equivalents,
limitations expires for the relevant taxing authority to examine receivables, accounts payable and accrued liabilities
the tax position or when more information becomes available. approximates fair value because of the short maturity of these
We include our liability for unrecognized tax benefits, including instruments. See Note 4, Debt, for information related to the
accrued penalties and interest, in accrued income taxes and fair value of our long-term debt.
other long-term liabilities on our consolidated balance sheets
and in income tax expense in our consolidated statements of Revenue Recognition
earnings.
We recognize revenue when the sales price is fixed or
We adopted the provisions of FASB Interpretation (‘‘FIN’’) determinable, collectibility is reasonably assured and the
No. 48, Accounting for Uncertainty in Income Taxes — an customer takes possession of the merchandise, or in the case
Interpretation of FASB Statement No. 109, effective March 4, of services, at the time the service is provided. Revenue is
2007. FIN No. 48 provides guidance regarding the recognized for store sales when the customer receives and
recognition, measurement, presentation and disclosure in the pays for the merchandise at the point of sale. For online sales,
financial statements of tax positions taken or expected to be we estimate and defer revenue and the related product costs
taken on a tax return, including the decision whether to file or for shipments that are in-transit to the customer. Revenue is
not to file in a particular jurisdiction. FSP FIN No. 48, recognized at the time we estimate the customer receives the
Definition of Settlement in FASB Interpretation No. 48, provides product. Customers typically receive goods within a few days
further guidance on how a company should determine whether of shipment. Such amounts were immaterial at March 1,
a tax position is effectively settled for the purpose of 2008, and March 3, 2007. Amounts billed to customers for
recognizing previously unrecognized tax benefits. We adopted shipping and handling are included in revenue.
the provisions of FSP FIN No. 48 beginning in the first quarter
Revenue is reported net of estimated sales returns and excludes
of fiscal 2008. See Note 8, Income Taxes, for further
sales taxes. We estimate our sales returns reserve based on
information.
historical return rates. Our sales returns reserve was $101 and
$104, at March 1, 2008, and March 3, 2007, respectively.
Long-Term Liabilities
We sell extended service contracts on behalf of an unrelated
The major components of long-term liabilities at March 1,
third party. In jurisdictions where we are not deemed to be the
2008, and March 3, 2007, included long-term rent-related
obligor on the contract, commissions are recognized in
liabilities, unrecognized tax benefits recorded pursuant to FIN
revenue at the time of sale. In jurisdictions where we are
No. 48, deferred compensation plan liabilities, advances
deemed to be the obligor on the contract, commissions are
received under vendor alliance programs and self-insurance
recognized in revenue ratably over the term of the service
reserves.
contract. Commissions represented 2.1%, 2.2% and 2.5% of
revenues in fiscal 2008, 2007 and 2006, respectively.
Foreign Currency
For revenue transactions that involve multiple deliverables, we
Foreign currency denominated assets and liabilities are
defer the revenue associated with any undelivered elements.
translated into U.S. dollars using the exchange rates in effect at
The amount of revenue deferred in connection with the
our consolidated balance sheet date. Results of operations and
undelivered elements is determined using the relative fair value
cash flows are translated using the average exchange rates
of each element, which is generally based on each element’s
throughout the period. The effect of exchange rate fluctuations
relative retail price.
on translation of assets and liabilities is included as a
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