Urban Outfitters 2010 Annual Report Download - page 58

URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Accounts Receivable
Accounts receivable primarily consists of amounts due from our wholesale customers as well as
credit card receivables. The activity of the allowance for doubtful accounts for the years ended
January 31, 2010, 2009 and 2008 is as follows:
Balance at
beginning of
year Additions Deductions
Balance at
end of
year
Year ended January 31, 2010 ..................... $1,229 $1,791 $(1,736) $1,284
Year ended January 31, 2009 ..................... $ 966 $4,375 $(4,112) $1,229
Year ended January 31, 2008 ..................... $ 849 $2,628 $(2,511) $ 966
Inventories
Inventories, which consist primarily of general consumer merchandise held for sale, are valued at
the lower of cost or market. Cost is determined on the first-in, first-out method and includes the cost of
merchandise and import related costs, including freight, import taxes and agent commissions. A
periodic review of inventory quantities on hand is performed in order to determine if inventory is
properly stated at the lower of cost or market. Factors related to current inventories such as future
consumer demand and fashion trends, current aging, current and anticipated retail markdowns or
wholesale discounts, and class or type of inventory are analyzed to determine estimated net realizable
value. Criteria utilized by the Company to quantify aging trends include factors such as average selling
cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost
during the average selling cycle, and the value and nature of merchandise currently priced below
original cost. A provision is recorded to reduce the cost of inventories to the estimated net realizable
values, if appropriate. The majority of inventory at January 31, 2010 and 2009 consisted of finished
goods. Unfinished goods and work-in-process were not material to the overall net inventory value.
Adjustments to reserves related to the net realizable value of inventories are primarily based on
the market value of the Company’s physical inventories, cycle counts and recent historical trends. The
Company’s physical inventories for fiscal 2010 were performed as of June 2009 and January 2010.
The Company’s estimates generally have been accurate and their reserve methods have been applied
on a consistent basis. The Company expects the amount of their reserves to increase over time as they
expand their store base and accordingly, related inventories.
Property and Equipment
Property and equipment are stated at cost and primarily consist of store related leasehold
improvements, buildings and furniture and fixtures. Depreciation is typically computed using the
straight-line method over five years for furniture and fixtures, the lesser of the lease term or useful life
for leasehold improvements, three to ten years for other operating equipment and 39 years for
buildings. Major renovations or improvements that extend the service lives of our assets are capitalized
over the extension period or life of the improvement, whichever is less.
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