Office Depot 2010 Annual Report Download - page 39

respectively, of amounts not yet presented for payment drawn in excess of disbursement account book balances,
after considering existing offset provisions. We may borrow on a cost effective basis during the period, which
may result in higher levels of borrowings and invested cash within the period. At the end of the period, cash may
be used to minimize borrowings outstanding at the balance sheet date.
Receivables: Trade receivables, net, totaled $687.4 million and $770.1 million at December 25, 2010 and
December 26, 2009, 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 25, 2010 and
December 26, 2009 was $28.0 million and $32.8 million, respectively. We do not own, but have recourse for
private label credit card receivables generated under our private label credit card program. The estimated fair
value liability associated with risk of loss is included in accrued expenses.
Our exposure to credit risk associated with trade receivables is limited by having a large customer base that
extends across many different industries and geographic regions. However, receivables may be adversely
affected by an economic slowdown in the U.S. or internationally. No single customer accounted for more than
10% of our total sales in 2010, 2009 or 2008.
Other receivables are $276.4 million and $351.1 million as of December 25, 2010 and December 26, 2009,
respectively, of which $198.3 million and $225.4 million are amounts due from vendors under purchase rebate,
cooperative advertising and various other marketing programs.
Inventories: Inventories are stated at the lower of cost or market value and are reduced for inventory losses
based on physical counts. In-bound freight is included as a cost of inventories. Also, certain vendor allowances
that are related to inventory purchases are considered to reduce the product cost. The weighted average method is
used to determine the cost of our inventory in North America and the first-in-first-out method is used for
inventory held within our international operations.
Income Taxes: Income tax expense is recognized at applicable U.S. or international tax rates. Certain revenue
and expense items may be recognized in one period for financial statement purposes and in a different period’s
income tax return. The tax effects of such differences are reported as deferred income taxes. Valuation
allowances are recorded for periods in which realization of deferred tax assets does not meet a more likely than
not standard. See Note H for additional information on deferred income taxes.
Property and Equipment: Property and equipment additions are recorded at cost. Depreciation and amortization
is recognized over their estimated useful lives using the straight-line method. The useful lives of depreciable
assets are estimated to be 15-30 years for buildings and 3-10 years for furniture, fixtures and equipment.
Computer software is amortized over three years for common office applications, five years for larger business
applications and seven years for certain enterprise-wide systems. Leasehold improvements are amortized over the
shorter of the estimated economic lives of the improvements or the terms of the underlying leases, including
renewal options considered reasonably assured at inception of the leases.
Goodwill and Other Intangible Assets: Goodwill represents the excess of the purchase price and related costs
over the value assigned to net tangible and identifiable intangible assets of businesses acquired. Accounting rules
require that we test at least annually for possible goodwill impairment. Unless conditions warrant earlier action,
we perform our test in the fourth quarter of each year using a discounted cash flow analysis that requires that
certain assumptions and estimates be made regarding industry economic factors and future profitability. During
2008, we recognized an impairment charge of $1,213.3 million related to goodwill, which is reflected in goodwill
and trade name impairments in the Consolidated Statements of Operations.
Unless conditions warrant earlier action, intangible assets with indefinite lives are tested annually for impairment
during the fourth quarter and written down to fair value as required. During 2008, a charge of approximately
$56.6 million was recorded to impair non-amortizing trade name intangibles. This impairment charge is included
in goodwill and trade name impairments in the Consolidated Statements of Operations.
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