Staples 2013 Annual Report Download - page 140

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
C-9
Note A - Summary of Significant Accounting Policies
Nature of Operations: Staples, Inc. and subsidiaries ("Staples" or "the Company") is a world-class provider of products
and services that serve the needs of business customers and consumers. Through its leading retail, online and delivery capabilities,
Staples lets customers shop however and whenever they want, whether it’s in-store, online or on mobile devices. The Company
has three reportable segments: North American Stores & Online, North American Commercial, and International Operations. The
North American Stores & Online segment consists of the U.S. and Canadian businesses that sell products and services through
retail stores and Staples.com. The North American Commercial segment consists of the U.S. and Canadian businesses that sell
and deliver products and services directly to businesses and includes Staples Advantage and Quill.com. The International
Operations segment consists of business units that sell and deliver products and services directly to customers in 23 countries in
Europe, Australia, South America and Asia.
Basis of Presentation: The consolidated financial statements include the accounts of Staples, Inc. and its wholly and
majority owned subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. The Company
accounts for investments in businesses in which it owns between 20% and 50% of the voting interest using the equity method, if
the Company has the ability to exercise significant influence over the investee company. Certain previously reported amounts
have been reclassified to conform with the current period presentation.
The Company completed the sale of its European Printing Systems Division business (“PSD”) on October 5, 2013.
Accordingly, PSD is being presented as a discontinued operation in the consolidated statement of income and the consolidated
balance sheet for all periods presented. Unless otherwise stated, any reference to the consolidated statement of income items in
the notes to the consolidated financial statements refers to results from continuing operations.
Fiscal Year: Staples' fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. Fiscal year 2013
("2013") consisted of the 52 weeks ended February 1, 2014, fiscal year 2012 ("2012") consisted of the 53 weeks ended February 2,
2013 and fiscal year 2011 ("2011") consisted of the 52 weeks ended January 28, 2012.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America ("U.S. GAAP") 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.
Receivables: Receivables include trade receivables financed under regular commercial credit terms and other non-trade
receivables. Gross trade receivables were $1.38 billion at February 1, 2014 and $1.36 billion at February 2, 2013. 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 historic trends. The allowance recorded at February 1, 2014 and February 2,
2013 was $30.8 million and $33.5 million, respectively.
Other non-trade receivables were $489.5 million at February 1, 2014 and $485.6 million at February 2, 2013 and consisted
primarily of purchase and advertising rebates due from vendors under various incentive and promotional programs. Amounts
expected to be received from vendors relating to the purchase of merchandise inventories are recognized as a reduction of inventory
cost and realized as part of cost of goods sold as the merchandise is sold. Amounts expected to be received from vendors that
represent reimbursement for specific, incremental costs incurred by the Company related to selling a vendor's products, such as
advertising, are recorded as an offset to those costs when they are recognized in the consolidated statement of income.
Inventory: Inventory is valued at the lower of weighted-average cost or market value. The Company reserves for obsolete,
overstocked and inactive inventory based on the difference between the weighted-average cost of the inventory and the estimated
market value using assumptions of future demand and market conditions.
Accounts Payable: The Company has agreements with third parties to provide accounts payable tracking and payment
services which facilitate participating suppliers' ability to finance payment obligations from the Company with designated third-
party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment
obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The
Company has no economic interest in the sale of these receivables. The Company's obligations to its suppliers, including amounts
due and scheduled payment dates, are not impacted by suppliers' decisions to finance amounts under these arrangements. The
Company presents these obligations as trade accounts payable.