Course Project – “notes to the financial statements”
Dick's Sporting Goods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Basis of Accounting and Financial Statement Presentation -
The financial statements of Dick's Sporting Goods, Inc. are prepared in accordance with generally accepted accounting principles (GAAP). Expenses are recorded when a liability is incurred and revenues are recorded when earned, regardless of the timing of related cash flows. Likewise, revenues are recognized when they are both measurable and available. For the purposes of these statements, available denotes collectible within the current period or soon enough thereafter to pay current liabilities; this is considered to be collected within 45 days of the end of the fiscal year. General bond obligation, principal and interest are reported as expenditures in the year due.
Use of estimates in the preparation of Financial Statements -
Corporate accounting policies are in compliance with generally accepted accounting principles. Estimates and assumptions are required within such compliance. As of the date of the financial statements, reported counts of assets, liabilities, contingent assets and liabilities as well as the reported level of revenues and expenses during the period may be affected. Those estimates could differ from those estimates. Cash Flow Presentation -
Dick’s Sporting Goods, Inc. employs the indirect method when preparing the Statements of Cash Flows. The indirect method uses net-income as a starting point, makes adjustments for all transactions for non-cash items, then adjusts from all cash-based transactions. Increases in assets are subtracted from net income and respectively, increases in liabilities are added back to net income. Likewise, an in-depth series of additions and subtractions converts accrual-basis net income (or loss) into cash flow. Derivative instruments in managing interest are classified as operating activities, instruments of net investment hedges are classified as financing activities. Income tax payments are classified as operating activities. Revenue Recognition –
Retail store sales are recognized upon the purchase by customers, less merchandise returned. Sales generated by online stores are recognized at the point of shipment of merchandise to customers. Revenues created by the sales of gift certificates, store merchandise credits and gift cards are recognized at the time of redemption. Returns, in general are accepted within 30 days from the date of purchase with a proof of purchase (receipt). Refunds are issued in the same form of payment that was originally used by the customer. Customers who lack documentation of purchase are accommodated with store credit. It is the belief of management that a 15% change in our reserves for returns would be immaterial to the financial statements of Dick’s Sporting Goods, Inc. for the last three years. Cash and Cash equivalents -
Tier one investments comprise of cash and cash equivalents. Cash and cash equivalents are highly liquid investments whose maturity is three months or less from purchase date, plus cash on hand. For the fiscal years of 2012, 2011 and 2010, the interest income from cash and cash equivalents was $.25 million, $.275 million and $.175 million respectively. Cost of Products Sold –
Product costs are primarily direct materials and supplies used in the manufacturing of products. Depreciation, direct overhead and labor expenses as pertains to the process of producing finished goods are included. Storage and distribution costs that are included are inbound freight costs, warehousing costs, costs of distributing to customers; internal transfers as well as various other shipping costs are also inclusive. Share-Based Compensation –
Dick’s Sporting Goods, Inc. accounts for its share-based compensation in accordance with ASC 718, stock compensation....
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