Urban Outfitters 2011 Annual Report Download - page 32

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less than one year from the balance sheet date. Securities classified as non-current have maturity dates
greater than one year from the balance sheet date. Available for sale securities such as ARS that fail at
auction and do not liquidate under normal course are classified as non-current assets. Successful
auctions would be classified as current assets. All of our marketable securities as of January 31, 2011
and 2010 were classified as available-for-sale.
Inventories
We value our inventories, which consist primarily of general consumer merchandise held for sale,
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 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 expected 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 includes 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, 2011 and 2010 consisted of finished goods.
Unfinished goods and work-in-process were not material to the overall net inventory value. Net
inventories as of January 31, 2011 and January 31, 2010 totaled $229.6 million and $186.1 million,
representing 12.8% and 11.4% of total assets, respectively. Any significant unanticipated changes in
the risk factors noted within this report could have a significant impact on the value of our inventories
and our reported operating results.
Adjustments to reserves related to the net realizable value of our inventories are primarily based
on the market value of our physical inventories, cycle counts and recent historical trends. Our physical
inventories for fiscal 2011 were performed as of June 2010 and January 2011. Our estimates generally
have been accurate and our reserve methods have been applied on a consistent basis. We expect the
amount of our reserves to increase over time as we expand our store base and accordingly, related
inventories.
Long-Lived Assets
Our long-lived assets consist principally of store leasehold improvements, buildings and furniture
and fixtures, and are included in the “Property and equipment, net” line item in our consolidated
balance sheets included in this report. Store leasehold improvements are recorded at cost and are
amortized using the straight-line method over the lesser of the applicable store lease term, including
lease renewals which are reasonably assured, or the estimated useful life of the leasehold
improvements. The typical initial lease term for our stores is ten years. Buildings are recorded at cost
and are amortized using the straight-line method over 39 years. Furniture and fixtures are recorded at
cost and are amortized using the straight-line method over their useful life, which is typically five
years. Net property and equipment as of January 31, 2011 and January 31, 2010 totaled $586.3 million
and $540.0 million, respectively, representing 32.7% and 33.0% of total assets, respectively.
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