Staples 2007 Annual Report Download - page 115

STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
NOTE A Summary of Significant Accounting Policies
Nature of Operations: Staples, Inc. and subsidiaries (‘‘Staples’’ or the ‘‘Company’’) pioneered the office products
superstore concept and Staples is a leading office products company. Staples operates three business segments: North
American Retail, North American Delivery and International Operations. The Company’s North American Retail
segment consists of the U.S. and Canadian business units that operate office products stores. The North American
Delivery segment consists of the U.S. and Canadian business units that sell and deliver office products and services
directly to customers, and includes Staples Business Delivery, Quill and Contract. The International Operations segment
consists of operating units that operate office products stores and that sell and deliver office products and services
directly to customers in 20 countries in Europe, Asia and South America.
Basis of Presentation: The consolidated financial statements include the accounts of Staples, Inc. and its wholly and
majority owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. All share and
per share amounts reflect, or have been restated to reflect, the three-for-two common stock split that was effected in the
form of a common stock dividend distributed on April 15, 2005.
Fiscal Year: Staples’ fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. Fiscal year 2007
consisted of the 52 weeks ended February 2, 2008, fiscal year 2006 consisted of the 53 weeks ended February 3, 2007 and
fiscal year 2005 consisted of the 52 weeks ended January 28, 2006.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management of Staples to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents: Staples considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Short-term Investments: Short-term investments, which primarily consist of market auction rate preferred stock and
debt securities and treasury securities, are classified as ‘‘available for sale’’ under the provisions of Statement of Financial
Accounting Standards (‘‘SFAS’’) No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities.’’ Accord-
ingly, the short-term investments are reported at fair value, with any related unrealized gains and losses included as a
separate component of stockholders’ equity, net of applicable taxes. Realized gains and losses and interest and dividends
are included in interest income or interest expense, as appropriate. Given the highly liquid nature of these investments,
there were no significant realized or unrealized gains or losses during fiscal year 2007, 2006 or 2005. At February 2, 2008,
the available for sale investments consisted of $27.0 million of treasury securities, with contractual maturities ranging
from February 2008 through September 2008.
Receivables: Receivables include trade receivables financed under regular commercial credit terms and other
non-trade receivables. Gross trade receivables were $642.2 million at February 2, 2008 and $511.1 million at February 3,
2007. Concentrations of credit risk with respect to trade receivables are limited due to Staples’ large number of
customers and their dispersion across many industries and geographic regions.
An allowance for doubtful accounts has been recorded to reduce trade receivables to an amount expected to be
collectible from customers based on specific evidence as well as historical trends. The allowance recorded at February 2,
2008 and February 3, 2007 was $22.5 million and $18.8 million, respectively.
Other non-trade receivables were $202.5 million at February 2, 2008 and $228.5 million at February 3, 2007 and
consisted primarily of amounts due from vendors under various incentive and promotional programs.
Merchandise Inventories: Merchandise inventories are valued at the lower of weighted-average cost or market
value.
Private Label Credit Card: Staples offers a private label credit card which is managed by a financial services
company. Under the terms of the agreement, Staples is obligated to pay fees which approximate the financial institution’s
cost of processing and collecting the receivables, which are non-recourse to Staples.
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