CompUSA 2011 Annual Report Download - page 22

Table of Contents
Accounting policy
Assumptions and uncertainties
Quantification and analysis of effect on actual
results if estimates differ materially
Long
-lived Assets. Management exercises
judgment in evaluating our long
-
lived assets for
impairment and in their depreciation and
amortization methods and lives. We believe we
will generate sufficient undiscounted cash flow
to more than recover the investments made in
property, plant and equipment.
The impairment analysis for long lived assets
requires management to make judgments about
useful lives and to estimate fair values of long
lived assets. It may also require us to estimate
future cash flows of related assets using
discounted cash flow model Our estimates of
future cash flows involve assumptions
concerning future operating performance and
economic conditions. While we believe that our
estimates of future cash flows are reasonable,
different assumptions regarding such cash flows
could materially affect our evaluations.
We have not made any material changes to our
long lived assets policy in the past three years
and we do not anticipate making any material
changes to this policy in the future.
We do not believe it is reasonably likely that the
estimates and assumptions used to determine
long lived asset impairment will vary materially
in the future. However if our estimates are
materially different than our actual experience
we could have a material gain or loss
adjustment.
An change of 10% in the carrying value of our
long lived assets would impact net income by
approximately $4.9 million.
Vendor Accruals. Our contractual agreements
with certain suppliers provide us with funding
or allowances for costs such as price protection,
markdowns and advertising as well as funds or
allowances for purchasing volumes.
Generally, allowances received as a
reimbursement of identifiable costs are recorded
as an expense reduction when the cost is
incurred. Sales related allowances are generally
determined by our level of purchases of product
and are deferred and recorded as a reduction of
inventory carrying value and are ultimately
included as a reduction of cost of goods when
inventory is sold.
Management makes assumptions and exercises
judgment in estimating period end funding and
allowances earned under our various
agreements. Estimates are developed based on
the terms of our vendor agreements and using
existing expenditures for which funding is
available, determining products whose market
price would indicate coverage for markdown or
price protection is available and estimating the
level of our performance under agreements that
provide funds or allowances for purchasing
volumes. Estimates of funding or allowances
for purchasing volume will include projections
of annual purchases which are developed using
current actual purchase data and historical
purchase trends. Accruals in interim periods
could be materially different if actual purchase
volumes differ from projections.
We have not made any material changes to our
vendor accrual policy in the past three years nor
do we anticipate making any material changes
to this policy in the future.
If actual results are different from the
projections used we could have a material gain
or loss adjustment.
A change of 10% in our vendor accruals at
December 31, 2011 would impact net income
by approximately $1.6 million.
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