Hibbett Sports 2010 Annual Report Download - page 39

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HIBBETT SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sports, Inc. is an operator of sporting goods retail stores in small to mid-sized markets
predominately in the Southeast, Southwest, Mid-Atlantic and lower Midwest regions of the United States. Our fiscal
year ends on the Saturday closest to January 31 of each year. The consolidated statements of operations for fiscal
years ended January 30, 2010, January 31, 2009 and February 2, 2008, include 52 weeks of operations. Our
merchandise assortment features a core selection of brand name merchandise emphasizing team sports equipment,
athletic and fashion apparel and footwear related accessories. We complement this core assortment with a selection
of localized apparel and accessories designed to appeal to a wide range of customers within each market.
Subsequent Events
In accordance with ASC Topic 855, Subsequent Events, we performed an evaluation of subsequent events
for the accompanying consolidated financial statements through March 26, 2010, the date these consolidated
financial statements were issued. We have concluded that no subsequent events have occurred that would require
recognition or disclosure in the consolidated financial statements other than Mr. Newsome being named the
Company’s Executive Chairman of the Board and stepping down as Chief Executive Officer and Mr. Rosenthal’s
promotion to Chief Executive Officer as described in Form 8-K filed on March 16, 2010.
Accounting Change
On the first day of Fiscal 2008, we changed our inventory valuation method. Previously, inventories were
principally valued at the lower of cost or market using the retail method. Commencing in Fiscal 2008, inventories
are principally valued at the lower of cost or market using the weighted average cost method.
ASC Topic 250, Accounting Changes and Error Corrections, requires a retrospective application of
changes in accounting principles. However, the effect of this change in accounting principle for periods prior to
Fiscal 2008 is not determinable, as the period specific information required to value inventory using the weighted
average cost method is not available for periods prior to Fiscal 2008. This change was recognized as a net increase
of $143,000 to inventory, an increase of $60,000 to deferred income tax liabilities and a cumulative effect to
retained earnings of $83,000. This change in valuation method did not have a material impact on net income or
diluted earnings per share.
We believe the adopted accounting method of weighted average cost is preferable to the retail method of
inventory valuation because it will produce more accurate inventory amounts reported in the balance sheet and, in
turn, more accurate cost of sales in the income statement. Our merchandising system, implemented in Fiscal 2008,
has facilitated our ability to value our inventory on the weighted average cost method.
Principles of Consolidation
The consolidated financial statements of our Company include its accounts and the accounts of all wholly-
owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Occasionally, certain reclassifications are made to conform previously reported data to the current presentation.
Such reclassifications had no impact on total assets, net income or stockholders’ investment.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect:
 the reported amounts of certain assets, including inventories and property and equipment;
 the reported amounts of certain liabilities, including legal and other accruals; and
 the reported amounts of certain revenues and expenses during the reporting period.
The assumptions used by management in future estimates could change significantly due to changes in
circumstances and actual results could differ from those estimates.