CompUSA 2011 Annual Report Download - page 43

SYSTEMAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Reclassifications — Certain prior year amounts were 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 amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Fiscal Year — The Company’s fiscal year ends at midnight on the Saturday closest to December 31. 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. 2011, 2010 and 2009 each included 52
weeks.
Foreign Currency Translation — The Company has operations in numerous foreign countries. The functional currency of 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. Translation gains or losses are recorded as a separate component of shareholders’ equity.
Cash — 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. Cash overdrafts are classified in accounts payable.
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 except in Europe and retail locations where an average cost is used.
Property, Plant and Equipment —
Property, plant and equipment is stated at cost. Furniture, fixtures and equipment, including equipment under
capital leases, are depreciated using the straight-line or accelerated method over their estimated useful lives ranging from three to ten years.
Buildings are depreciated using the straight-line method over estimated useful lives of 30 to 50 years. Leasehold improvements are amortized
over the shorter of the useful lives or the term of the respective leases.
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.
Goodwill and intangible assets — Goodwill represents the excess of the cost of acquired assets over the fair value of assets acquired. The
Company tests goodwill and intangibles for impairment annually or more frequently if indicators of impairment exist. The Company assesses
the carrying value of its definite-lived intangible assets if circumstances indicate that those values may not be recoverable. In addition, goodwill
is required to be tested for impairment after a portion of the goodwill is allocated to a business targeted for disposal. The Company’
s identifiable
intangible assets consist of trademarks, trade and domain names, technology, retail leases and customer lists (See Note 2).
Accruals — Management makes estimates and assumptions that affect amounts reported in the consolidated financial statements and
accompanying notes. These estimates are based upon various factors such as the number of units sold, historical and anticipated results and data
received from third party vendors. Actual results could differ from these estimates. Our most significant estimates include those related to the
costs of vendor drop shipments, sales returns and allowances, cooperative advertising and customer rebate reserves, and other vendor and
employee related costs.
Income Taxes — Deferred tax assets and liabilities are recognized for the effect of temporary differences between the book and tax bases of
recorded assets and liabilities and for tax loss carry forwards. The realization of net deferred tax assets is dependent upon our ability to generate
sufficient future taxable income. Where it is more likely than not that some portion or the entire deferred tax asset will not be realized, we have
provided a valuation allowance. If the realization of those deferred tax assets in the future is considered more likely than not, an adjustment to
the deferred tax assets would increase net income in the period such determination is made.
Table of Contents
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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