Rue 21 2010 Annual Report Download - page 56

mid-summer in anticipation of the back-to-school selling season. Our business is also subject, at certain times, to
calendar shifts which may occur during key selling times such as school holidays, Easter and regional fluctuations
in the calendar during the back-to-school selling season.
Segment Reporting
The Financial Accounting Standard Board (FASB) has established authoritative guidance for reporting
information about a company’s operating segments, including disclosures related to a company’s products and
services, geographic areas and major customers. The Company operates in and reports as a single operating segment
which is the operation of its retail stores which are only located in the United States. The Company has no
international sales. Net sales are generated through the retail store sale of merchandise to consumers only. All of the
Company’s identifiable assets are located in the United States.
Fair Value of Financial Instruments
The FASB has established authoritative guidance that requires management to disclose the estimated fair value
of certain assets and liabilities defined as financial instruments. As of January 29, 2011 and January 30, 2010,
management believes that the carrying amounts of cash and cash equivalents, receivables, and payables approx-
imate fair value because of the short maturity of these financial instruments.
Cash and Cash Equivalents
Cash includes cash equivalents, which includes credit and debit card transactions. Credit and debit card transactions
are typically paid to the Company on the next business day. Amounts due from credit and debit card transactions totaled
$3,323 and $2,369 on January 29, 2011 and January 30, 2010, respectively. The Company considers all highly liquid
investments purchased with an initial maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable generally represent tenant allowances due from lessors. The Company evaluates
collectability and has determined that no allowance is necessary. As of fiscal year end 2010, receivables consisted
of: construction allowances — $5,063, third party sell offs — $928 and other — $742. This compares to fiscal year
end 2009 of: construction allowances — $3,456 and other — $378.
Merchandise Inventory
Merchandise inventory is valued at the lower of cost (first-in, first-out basis) or market using the retail inventory
method. The Company records merchandise receipts at the time they are delivered to our consolidator, as we are not
directly importing any merchandise. This is the point at which title and risk of loss transfer to the Company.
The Company reviews its inventory levels to identify slow-moving merchandise and generally uses mark-
downs to clear slow-moving merchandise. The Company records a markdown reserve based on estimated future
markdowns related to current inventory. Each period the Company evaluates the selling trends experienced and the
related promotional events or pricing strategies in place to sell through the current inventory levels. Markdowns
may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer
preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in
stock will not sell at its currently ticketed price. Such markdowns may have an adverse impact on earnings,
depending on the extent and amount of inventory affected. The anticipated deployment of new seasonal mer-
chandise is reflected within the estimated future markdowns reserve utilized in valuing current inventory, as such
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rue21, inc. and subsidiary
Notes to Consolidated Financial Statements — (continued)