Restoration Hardware 2012 Annual Report Download - page 140

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Fiscal Years
The Company’s fiscal year ends on the Saturday closest to January 31. As a result, the Company’s fiscal
year may include 53 weeks. The fiscal year ended February 2, 2013 (“fiscal 2012”) consisted of 53 weeks and the
fiscal years ended January 28, 2012 (“fiscal 2011”) and January 29, 2011 (“fiscal 2010”) each consisted of 52
weeks.
Use of Accounting Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates
and such differences could be material to the consolidated financial statements.
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities of three months or less to be cash
equivalents.
Concentration of Credit Risk
The Company maintains its cash and cash equivalent accounts in financial institutions in both U.S. dollar
and Canadian dollar denominations. Accounts at the U.S. institutions are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to $250,000 and accounts at the Canadian institutions are insured by the
Canada Deposit Insurance Corporation (“CDIC”) up to $100,000 Canadian dollars. As of February 2, 2013, the
Company had two U.S. bank account balances that were in excess of the FDIC insurance limit and one Canadian
bank account balance that was in excess of the CIDC insurance limit. The Company performs ongoing
evaluations of these institutions to limit its concentration of credit risk.
Accounts Receivable
Accounts receivable consist primarily of receivables from the Company’s credit card processors for sales
transactions and tenant improvement allowances from the Company’s landlords in connection with new leases.
Accounts receivable is presented net of allowance for doubtful accounts, which is recorded on a specific
identification basis. The allowance for doubtful accounts was not significant as of February 2, 2013 and
January 28, 2012.
Merchandise Inventories
The Company’s merchandise inventories are comprised of finished goods and are carried at the lower of
cost or market, with cost determined on a weighted-average cost method and market determined based on the
estimated net realizable value. To determine if the value of inventory should be marked down below original
cost, the Company considers current and anticipated demand, customer preference and the merchandise age. The
inventory value is adjusted periodically to reflect current market conditions, which requires management
judgments that may significantly affect the ending inventory valuation, as well as gross margin. The significant
estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory and lower
of cost or market reserves) and estimates of inventory shrinkage. The Company adjusts its inventory for
obsolescence based on historical trends, aging reports, specific identification and its estimates of future retail
sales prices.
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