The Gap 2006 Annual Report Download - page 56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the 53 Weeks Ended February 3, 2007 (Fiscal 2006), 52 Weeks Ended January 28, 2006 (Fiscal 2005),
and 52 Weeks Ended January 29, 2005 (Fiscal 2004)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Gap, Inc. (the “Company,” “we,” “our”), a Delaware Corporation, is a specialty retailer selling casual
apparel, accessories and personal care products for men, women and children under a variety of brand names
including Gap, Banana Republic, Old Navy, and Forth & Towne. We operate stores in the United States, Canada,
Ireland, the United Kingdom, France and Japan, while our independent third party franchisees own and operate
stores in Asia and the Middle East under the Gap and Banana Republic brand names. Our U.S. customers may
shop online at gap.com, bananarepublic.com, and oldnavy.com. Beginning in October 2006, we launched
Piperlime.com, an online shoe store selling an assortment of third party brands for men, women and children.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All
intercompany transactions and balances have been eliminated.
Fiscal Year
Our fiscal year is a 52- or 53-week period ending on the Saturday closest to January 31. Fiscal 2006
consisted of 53 weeks, the 53rd week contributing $200 million of net sales. Net sales and operating expenses for
the last fiscal month of fiscal 2006, which was a 5 week period, were accounted for as a regular five-week month.
Fiscal 2005 and fiscal 2004 both consisted of 52 weeks. Fiscal 2007 will consist of 52 weeks.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America 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 revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents, Short-Term Investments, and Restricted Cash
Amounts in-transit from banks for customer credit card, debit card and electronic benefit transfer
transactions that process in less than seven days are classified as cash and equivalents in our Consolidated
Balance Sheets. The banks process the majority of these amounts within one to two business days.
All highly liquid investments with maturities of 91 days or less at the date of purchase are classified as cash
equivalents. Highly liquid investments with maturities greater than 91 days and less than one year at the date of
purchase are classified as short-term investments. Our short-term and cash equivalent investments are classified
as held-to-maturity based on our positive intent and ability to hold the securities to maturity. Primarily all
securities held are U.S. government and agency securities, commercial paper, and bank certificates of deposit and
are stated at amortized cost, which approximates fair market value due to the short maturities of these
instruments. Income related to these securities is reported as a component of interest income.
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