Stein Mart 2011 Annual Report Download - page 33

Table of Contents
STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
1. Summary of Significant Accounting Policies and Other Information
As of January 28, 2012 we operated a chain of 262 retail stores in 29 states that offers the fashion merchandise, service and presentation of a
better department or specialty store at prices competitive with off-price retail chains.
As used herein, the terms “we”, “our”, “us”, “Stein Mart” and the “Company” refer to Stein Mart, Inc. and its wholly-
owned subsidiaries, Stein
Mart Buying Corp. and Stein Mart Holding Corp.
Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-
company accounts have been eliminated in consolidation.
Fiscal Year End. Our fiscal year ends on the Saturday closest to January 31. Fiscal years 2011, 2010 and 2009 ended on January 28,
2012, January 29, 2011 and January 30, 2010, respectively. Fiscal 2011, 2010 and 2009 included 52 weeks. References to years in the
Consolidated Financial Statements relate to fiscal years rather than calendar years.
Use of Estimates.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents. Cash and cash equivalents include primarily investments in money market funds. The money market fund
investments are Level 1 assets because fair value is based on readily available market prices. The fair value of these assets was $83.1 million at
January 28, 2012 and $68.1 million at January 29, 2011.
Also included in cash and cash equivalents are cash on hand in the stores, deposits with banks and amounts due from credit card transactions
with settlement terms of five days or less. Credit and debit card receivables included within cash were $8.5 million at January 28, 2012 and
January 29, 2011.
Inventories. Merchandise inventories are valued at the lower of average cost or market, on a first-in first-out basis, using the retail inventory
method (“RIM”). RIM is an averaging method that is widely used in the retail industry. The use of RIM results in inventories being valued at
the lower of cost or market as markdowns are taken as a reduction of the retail values of inventories.
Vendor Allowances. We receive allowances from some of our vendors primarily related to markdown reimbursement, damaged/defective
merchandise and vendor compliance issues. Vendor allowances are recorded when earned in accordance with Accounting Standards
Codification (“ASC”) Topic 605-50, Revenue Recognition, Customer Payments and Incentives . Allowances received from vendors related to
profitability of inventory recently sold are reflected as reductions to cost of merchandise sold in the later of the period that the merchandise
markdown is incurred or the allowance is negotiated. Allowances received from vendors related to damaged/defective inventory are reflected
as reductions to the cost of merchandise as it is received. Allowances received due to compliance issues (primarily violations of shipping and
merchandise preparation requirements) are reflected as a reduction to the cost of the merchandise when negotiated.
Property and Equipment. Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over estimated useful lives of 3-10 years for fixtures, equipment and software and 5-10 years for
leasehold improvements. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the term
of the lease. We capitalize costs associated with the acquisition or development of software for internal use. We only capitalize subsequent
additions, modifications or upgrades to internal-use software to the extent that such changes increase functionality. We expense software
maintenance and training costs as incurred.
Impairment of Long-Lived Assets. We follow the guidance in ASC Topic 360, Property, Plant and Equipment , which requires impairment
losses to be recorded on long-lived assets used in operations whenever events or changes in circumstances indicate that the net carrying
amounts may not be recoverable. For long-
lived assets held for use, an impairment loss is recognized if the sum of the future undiscounted cash
flows from the use of the assets is less than the carrying value of the assets. The amount of the impairment is the excess of the carrying value of
the asset over its fair value. Fair value is based on the best information available, including prices for similar assets. Impairment reviews are
performed for individual stores during the fourth quarter, or more frequently should circumstances change.
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