Napa Auto Parts 2009 Annual Report Download - page 42

Table of Contents
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

 
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Genuine Parts Company and all of its majority-owned subsidiaries (the Company) is a distributor of automotive replacement parts,
industrial replacement parts, office products, and electrical/electronic materials. The Company serves a diverse customer base through
approximately 2,000 locations in North America and, therefore, has limited exposure from credit losses to any particular customer,
region, or industry segment. The Company performs periodic credit evaluations of its customers’ financial condition and generally does
not require collateral.

The consolidated financial statements include all of the accounts of the Company. The net income attributable to noncontrolling
interests is not material to the Company’s consolidated net income. Significant intercompany accounts and transactions have been
eliminated in consolidation.

The preparation of the consolidated financial statements, in conformity with U.S. generally accepted accounting principles, requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results may differ from those estimates and the differences could be material.

The Company records revenue when the following criteria are met: persuasive evidence of an arrangement exists, delivery has
occurred, the Company’s price to the customer is fixed and determinable and collectability is reasonably assured. Delivery is not
considered to have occurred until the customer assumes the risks and rewards of ownership.

The consolidated balance sheets and statements of income of the Company’s foreign subsidiaries have been translated into
U.S. dollars at the current and average exchange rates, respectively. The foreign currency translation adjustment is included as a
component of accumulated other comprehensive (loss) income.

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash
equivalents.
 
The Company evaluates the collectability of trade accounts receivable based on a combination of factors. Initially, the Company
estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is
periodically adjusted when the Company becomes aware of a specific customer’s inability to meet its financial obligations (e.g.,
bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While the Company has a large customer base that
is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in
higher than expected defaults, and, therefore, the need to revise estimates for bad debts. For the years ended December 31, 2009, 2008,
and 2007, the Company recorded provisions for bad debts of approximately $28,463,000, $23,883,000, and $13,514,000, respectively.
At December 31, 2009 and 2008, the allowance for doubtful accounts was approximately $16,590,000 and $18,588,000, respectively.
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