Office Depot 2008 Annual Report Download - page 55

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: Office Depot, Inc. (“Office Depot”) is a global supplier of office products and services under
the Office Depot® brand and other proprietary brand names. As of December 27, 2008, we sold to customers in 48
countries throughout North America, Europe, Asia and Latin America either through wholly-owned entities,
majority-owned entities or other ventures covering 38 countries, and through alliances in an additional ten countries.
Basis of Presentation: The consolidated financial statements of Office Depot and its subsidiaries have been
prepared in accordance with accounting principles generally accepted in the United States of America. All
intercompany transactions have been eliminated in consolidation. We have a majority, but not total, ownership
interest in entities in India and Sweden. Those entities have been consolidated since the date of acquisition with
minority interest presented for the portion we do not own. We also participate in a joint venture selling office
products and services in Mexico and Central America that is accounted for using the equity method with its results
presented in miscellaneous income, net in the Consolidated Statements of Operations. See Note N for information
on our investment in Mexico.
Fiscal Year: Fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. All years
presented are based on 52 weeks.
Estimates and Assumptions: Preparation of these financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that
affect amounts reported in the financial statements and related notes. Actual results may differ from those estimates.
Foreign Currency: Assets and liabilities of international operations are translated into U.S. dollars using the
exchange rate at the balance sheet date. Revenues, expenses and cash flows are translated at average monthly
exchange rates. Translation adjustments resulting from this process are recorded in stockholders’ equity as a
component of accumulated other comprehensive income.
Monetary assets and liabilities denominated in a currency other than a consolidated entity’s functional currency
result in transaction gains or losses from the remeasurement at spot rates at the end of the period. Foreign currency
gains and losses are recorded in miscellaneous income, net in the Consolidated Statements of Operations.
Cash Equivalents: All short-term highly liquid securities with maturities of three months or less from the date of
acquisition are classified as cash equivalents. Approximately $15 million and $18 million of restricted cash held on
deposit was included in other current assets at December 27, 2008 and December 29, 2007, respectively.
Cash Management: Our cash management process generally utilizes zero balance accounts which provide for the
settlement of the related disbursement accounts on a daily basis. Accounts payable as of December 27, 2008 and
December 29, 2007 included $71 million and $127 million, respectively, of amounts not yet presented for payment
drawn in excess of disbursement account book balances, after considering existing offset provisions. We borrow on
a cost effective basis during the quarter, which may result in higher levels of borrowings and invested cash within
the period. At the end of the quarter, cash may be used to minimize borrowings outstanding at the balance sheet
date.
Short-term Investments: We held no short-term investments at December 27, 2008 or December 29, 2007. When
held, investments typically are available-for-sale debt securities and reported at fair market value, based on quoted
market prices using the specific identification method.
Receivables: Trade receivables, net, totaled $849.6 million and $1,039.9 million at December 27, 2008 and
December 29, 2007, respectively. An allowance for doubtful accounts has been recorded to reduce receivables to an
amount expected to be collectible from customers. The allowance recorded at December 27, 2008 and December 29,
2007 was $46.0 million and $46.3 million, respectively. Receivables generated through a private label credit card
program are transferred to a financial services company, a portion of which have recourse to Office Depot. The
estimated fair value liability associated with risk of loss is included in accrued expenses.