Ingram Micro 1999 Annual Report Download - page 37

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Ingram Micro
Annual Report
Foreign Currency Translation and Remeasurement
Financial statements of foreign subsidiaries, for which the functional currency is the local currency, are translated into United
States (“U.S.”) dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange
rate for each period for statement of income items.Translation adjustments are recorded in other comprehensive income.The
functional currency of the Company’s subsidiaries in Latin America and certain countries within the Company’s Asian operations
is the U.S. dollar; accordingly, the monetary assets and liabilities of these subsidiaries are translated into U.S. dollars at the
exchange rate in effect at the balance sheet date. Revenues, expenses, gains or losses are translated at the average exchange rate
for the period, and nonmonetary assets and liabilities are translated at historical rates.The resultant remeasurement gains and losses
of these subsidiaries are recognized in the Consolidated Statement of Income. Gains and losses from foreign currency transactions
are included in the Consolidated Statement of Income.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable and other accrued expenses approximate fair value
because of the short maturity of these items.The carrying amounts of outstanding debt issued pursuant to bank credit agreements
approximate fair value because interest rates over the relative term of these instruments approximate current market interest
rates.The estimated fair value of the Zero Coupon Convertible Debentures including original issue discount was $388,939 at
January 1, 2000 based upon quoted market prices.The carrying value at January 1, 2000 was $440,943.
Cash
Book overdrafts of $140,149 and $228,556 as of January 1, 2000, and January 2, 1999, respectively, are included in accounts
payable.The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of average cost or market.
Long-Lived Assets
The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circum-
stances have made recovery of the asset’s carrying value unlikely. An impairment loss would be recognized when the sum of the
expected, undiscounted future net cash flows is less than the carrying amount of the asset.The amount of an impairment loss
would be recognized as the excess of the asset’s carrying value over the fair value.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated
useful lives. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life:
Buildings 40 years
Leasehold improvements 3–17 years
Distribution equipment 5–7 years
Computer equipment and software 2–5 years
In 1998, the Company elected to adopt the provisions of Statement of Position 98-1, “Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.” This statement requires capitalization of computer software costs that meet
both the definition of internal-use software and defined criteria for capitalization.The Company amortizes the costs of computer