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42
SYSTEMAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Systemax Inc.
and its wholly-owned subsidiaries (collectively, the “Company” or “Systemax”). All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year balance sheet amounts have been reclassified to
conform to current year presentation.
Use of Estimates In Financial Statements – The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Fiscal Year – Effective the fourth quarter of 2007, the Company changed its fiscal year end from a calendar year ending on
December 31 to a fiscal year ending at midnight on the Saturday closest to December 31. Fiscal years will typically include
52 weeks, but every few years will include 53 weeks which was the case in 2005. For clarity of presentation herein, all
fiscal years are referred to as if they ended on December 31. The fiscal year will be divided into four fiscal quarters that
each end at midnight on a Saturday. Fiscal quarters will typically include 13 weeks, but the fourth quarter will include 14
weeks in a 53 week fiscal year. For clarity of presentation herein, all fiscal quarters are referred to as if they ended on the
traditional calendar month. The effect of the change in year end in 2007 was de minimis.
Foreign Currency Translation – The Company has operations in numerous foreign countries. The functional currency of in
each foreign country is the local currency. The financial statements of the Company’s foreign entities are translated into
U.S. dollars, the reporting currency, using year-end exchange rates for assets and liabilities, average exchange rates for the
statement of operations items and historical rates for equity accounts. The translation differences are recorded as a separate
component of shareholders' equity.
Cash and Cash Equivalents – The Company considers amounts held in money market accounts and other short-term
investments, including overnight bank deposits, with an original maturity date of three months or less to be cash
equivalents.
Inventories – Inventories consist primarily of finished goods and are stated at the lower of cost or market value. Cost is
determined by using the first-in, first-out method. Allowances are maintained for obsolete, slow-moving and non-saleable
inventory.
Property, Plant and Equipment – Property, plant and equipment is stated at cost. Depreciation of furniture, fixtures and
equipment, including equipment under capital leases, is on the straight-line or accelerated method over their estimated
useful lives ranging from three to ten years. Depreciation of buildings is on the straight-line method over estimated useful
lives of 30 to 50 years. Leasehold improvements are amortized over the lesser of the useful lives or the term of the
respective leases.
Capitalized Software Costs – The Company capitalizes purchased software ready for service and capitalizes software
development costs incurred on significant projects from the time that the preliminary project stage is completed and
management commits to funding a project until the project is substantially complete and the software is ready for its
intended use. Capitalized costs include materials and service costs and payroll and payroll-related costs. Capitalized
software costs are amortized using the straight-line method over the estimated useful life of the underlying system,
generally five years.
Evaluation of Long-lived Assets – Long-lived assets are evaluated for recoverability whenever events or changes in
circumstances indicate that an asset may have been impaired. In evaluating an asset for recoverability, the Company
estimates the future cash flows expected to result from the use of the asset and eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an
impairment loss, equal to the excess of the carrying amount over the fair market value of the asset is recognized.