Dick's Sporting Goods 2005 Annual Report Download - page 46

1. Summary of Significant Accounting Policies
Operations – Dick’s Sporting Goods, Inc. (together with its subsidiaries, the “Company”) is a specialty retailer selling sporting
goods, footwear and apparel through its 255 stores, the majority of which are located throughout the Eastern half of the
United States. On July 29, 2004, a wholly owned subsidiary of Dick’s Sporting Goods, Inc. completed the acquisition of Galyan’s
Trading Company, Inc. (“Galyan’s). The Consolidated Statements of Income include the operation of Galyan’s from the date of
acquisition forward for the year ended January 29, 2005.
Fiscal Year – The Company’s fiscal year ends on the Saturday closest to the end of January. Fiscal years 2005, 2004 and 2003
ended on January 28, 2006, January 29, 2005 and January 31, 2004.
Principles of Consolidation – The consolidated financial statements include Dick’s Sporting Goods, Inc. and its wholly owned
subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of 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 amounts 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.
Cash and Cash Equivalents – Cash and cash equivalents consist of cash on hand and all highly liquid instruments purchased
with a maturity of three months or less at the date of purchase. Interest income was $0.1 million, $1.2 million and $0.1 million
for fiscal 2005, 2004 and 2003, respectively.
Cash Management – The Company’s cash management system provides for the reimbursement of all major bank
disbursement accounts on a daily basis. Accounts payable at January 28, 2006 and January 29, 2005 include $68.0 million
and $60.6 million, respectively, of checks drawn in excess of cash balances not yet presented for payment.
Accounts Receivable – Accounts receivable consists principally of amounts receivable from vendors. The allowance for doubtful
accounts totaled $1.9 million and $4.8 million, as of January 28, 2006 and January 29, 2005, respectively.
Inventories – Inventories are stated at the lower of weighted average cost or market. Inventory cost consists of the direct cost of
merchandise including freight. Inventories are net of shrinkage, obsolescence, other valuations and vendor allowances totaling
$38.2 million and $37.7 million at January 28, 2006 and January 29, 2005, respectively.
Property and Equipment – Property and equipment are recorded at cost and include capitalized leases. For financial reporting
purposes, depreciation and amortization are computed using the straight-line method over the following estimated useful lives:
Buildings 40 years
Leasehold improvements 10–23 years
Furniture, fixtures and equipment 3–7 years
Vehicles 5 years
For leasehold improvements and property and equipment under capital lease agreements, depreciation and amortization are
calculated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term.
Renewals and betterments are capitalized and repairs and maintenance are expensed as incurred.
The Company periodically evaluates its long-lived assets to assess whether the carrying values have been impaired, using the
provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets.”
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED 2005, 2004 AND 2003