Costco 1998 Annual Report Download - page 23

MERRILL CORPORATION NETWORK COMPOSITION SYSTEM CPICARD // 3-DEC-98 18:50 DISK004:[98SEA7.98SEA2097]DW2097A.;6
IMAGES:[PAGER.PSTYLES]MRLL.BST;4 pag$fmt:mrll.fmt Free: 470D*/ 540D Foot: 0D/ 0D VJ R Seq: 1 Clr: 0
COSTCO COMPANIES A/R (Y/E 8-31-98) Proj: P1826SEA98 Job: 98SEA2097 File: DW2097A.;6
Merrill/Seattle [phone] Page Dim: 8.250N X 10.750NCopy Dim: 38. X 54.3
COSTCO COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 1—Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Costco Companies, Inc., a Delaware
corporation, and its subsidiaries (‘‘Costco’’ or the ‘‘Company’’). Costco is a holding company which
operates primarily through its major subsidiaries, The Price Company and subsidiaries, and Costco
Wholesale Corporation and subsidiaries. All intercompany transactions between the Company and its
subsidiaries have been eliminated in consolidation. The Price Company and Costco Wholesale Corpora-
tion primarily operate membership warehouses under the Costco Wholesale name.
Costco operates membership warehouses that offer very low prices on a limited selection of nation-
ally-branded and selected private label products in a wide range of merchandise categories in no-frills, self-
service warehouse facilities. At August 30, 1998, Costco operated 278 warehouse clubs: 211 in the United
States (in 24 states); 56 in Canada (in nine Canadian provinces); seven in the United Kingdom; three in
Korea, and one in Taiwan. As of August 30, 1998, the Company also operated (through a 50%-owned joint
venture) 14 warehouses in Mexico.
The Company’s investment in the Price Club Mexico joint venture and in other unconsolidated joint
ventures that are less than majority owned are accounted for under the equity method.
Fiscal Years
The Company reports on a 52/53 week fiscal year basis which ends on the Sunday nearest August 31st.
Fiscal years 1998, 1997, and 1996 were 52 weeks.
Cash and Cash Equivalents
The Company considers all investments in highly liquid debt instruments maturing within 90 days after
purchase as cash equivalents unless amounts are held in escrow for future property purchases or restricted
by agreements.
Short-term Investments
Short-term investments include highly liquid investments in United States and Canadian government
obligations, along with other investment vehicles, some of which have maturities of three months or less at
the time of purchase. The Company’s policy is to classify these investments as short-term investments
rather than cash equivalents if they are acquired and disposed of through its investment trading account,
held for future property purchases, or restricted by agreement. The fair value of the short-term invest-
ments approximates their carrying value and unrealized holding gains and losses were not significant.
Receivables
Receivables consist primarily of vendor rebates and promotional allowances and other miscellaneous
amounts due to the Company, and are net of allowance for doubtful accounts of $4,297 at August 30, 1998
and $4,360 at August 31, 1997.
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