FOR THE YEAR ENDED 2ND, MAY 2015 The Significant Accounting Policies and Methods Consolidation The consolidated financial reports include the accounts of Barnes & Noble Incorporation as well as wholly and majority owned subsidiary businesses. Significant intercompany transactions and accounts have not been included in the consolidation report (Jarnagin, 2006). Cash & Cash Equivalents All highly liquid instruments procured with an initial maturity of three months or less were regarded cash equivalents (Epstein & Jermakowicz, 2010). Merchandise Inventories The inventories are stated at different market costs. Those majorly comprising of finished goods are stated at the lower or market cost.
There are two cost determinants which include the retail inventory LIFO basis and at times first in, First out (FIFO) basis (Epstein & Lee, 2004). The Barnes & Noble Inc College textbook and book trade inventories are usually valued using the LIFO, whereby the related reserve is not material to the recorded figures of the company’ s inventories as at 2nd May, 2015. There were no LIFO adjustments in fiscal period of 2015 as compared to the favorable adjustment of $7,692 in the fiscal period of 2014. The basis of determination was an estimated net realizable value.
This is ideally the inventory selling price. Besides, the reserves for the non-returnable inventory had basis on the firm’ s liquidating history on non-returnable inventory (Eisen, 2000). The shortage rates were estimated on the basis of the historical rates and are believed to be implicated by the changes in the merchandise mix as well as changes in the actual shortage trends. Long-term Assets The property and Equipment were carried at costs less than the accumulated amortization and depreciation. For the purpose of reporting, depreciation was calculated using the straight-line method over the estimated lives.
For the tax purposes, different methods are used. The maintenance and repairs were expensed as incurred while major maintenance and remodeling costs are capitalized whenever they extend the useful life of the assets. The leasehold improvements were amortized over the shorter of their estimated useful lives or a period of 10 years (Alexander, Britton, & Jorissen, 2005). The capitalized lease acquisition costs were also amortized over the terms of the underlying lease. The system costs were capitalized and incorporated in property and equipment. The costs are normally depreciated on their estimated useful lives from the date the systems become operational.
The company’ s property was $449,292 and equipment $490,713 of net of accumulated depreciation as at 2nd May, 2015 and 3rd May, 2014 respectively and $179,462 and $198,972 of depreciation expenses for fiscal year 2015 and 2014 respectively (Epstein & Jermakowicz, 2010). Goodwill and Unamortizable Intangible Assets The costs in excess of net assets of businesses acquired are presented as goodwill in the accompanying consolidated balance sheets. The goodwill and other intangible assets, requires that goodwill and other unamortizable intangible assets no longer be amortized but be tested for impairment annually or earlier whenever there are indications of impairment (Whittington, 2011). The company completed its annual goodwill impairment test as at first day of the third quarter of the fiscal period 2015.
In performance of the valuations, the firm used cash flow that reflected the management’ s forecasts and discount rates that included risk adjustments that were in consistence with the market conditions (Greuning, 2006).
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