Restoration Hardware 2015 Annual Report Download - page 71

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68
NOTE 3—SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United
States (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.
Certain prior year amounts have been reclassified for consistency with the current year presentation. This reclassification had no
effect on the previously reported consolidated results of operations, financial position or cash flows.
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 years ended January 30, 2016 (“fiscal 2015”), January 31, 2015 (“fiscal 2014”) and February 1, 2014 (“fiscal 2013”)
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 all highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Investments
All of the Company’s investments are classified as available-for-sale and are carried at fair value. The Company invests excess
cash primarily in investment-grade interest-bearing securities such as money market funds, certificates of deposit, commercial paper,
government agency obligations and guaranteed obligations of the U.S. government, all of which are subject to minimal credit and
market risks. Investments that have an original maturity of 91 days or more at the date of purchase and a current maturity of less than
one year are classified as short-term investments, while investments with a current maturity of more than one year are classified as
long-term investments. Fair value is determined based on quoted market rates when observable or utilizing data points that are
observable, such as quoted prices, interest rates and yield curves. The cost of available-for-sale marketable securities sold is based on
the specific identification method. Unrealized holding gains and losses, net of tax, are recorded in accumulated other comprehensive
loss on the consolidated statements of stockholders’ equity until realized. Realized gains and losses, interest income, dividends, and
amortization and accretion of purchase premiums and discounts on investments are included in interest expense on the consolidated
statements of income. Total interest income and accretion of purchase discounts on investments were $1.5 million and $0.1 million in
fiscal 2015, respectively. Total amortization of purchase premiums on investments was $1.2 million in fiscal 2015. The Company did
not record any realized gains and losses or dividends in fiscal 2015.
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 January 30, 2016 and January 31, 2015, and at various time throughout these fiscal years, the Company had
cash in financial institutions in excess of the amount insured by the FDIC and CDIC. 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,
receivables related to our contract business and other miscellaneous receivables. Accounts receivable is presented net of allowance for
doubtful accounts, which is recorded on a specific identification basis. The allowance for doubtful accounts was $2.3 million as of
both January 30, 2016 and January 31, 2015.