Merchandise Inventories: Our inventories are stated at the lower of cost or market value. We use the weighted average method for determining the cost of over 90% of our inventories and the first-in-first-out (FIFO) method for the remainder of our inventories, primarily in our International Division.

Income Taxes: We use the provisions of SFAS No. 109, “Accounting for Income Taxes,” to calculate our current Federal and state income tax liability, as well as any deferred tax assets or liabilities. Under this standard, deferred tax assets and liabilities represent the tax effects, based on current law, of any temporary differences in the timing of when revenues and expenses are recognized for tax purposes and when they are recognized for financial statement purposes.

We have not recognized income taxes on the undistributed earnings of certain of our foreign subsidiaries. Our intention is to reinvest such earnings permanently to fund further overseas expansion. Cumulative undistributed earnings of our foreign subsidiaries for which no Federal income taxes have been provided approximated $440.5 million and $354.5 million as of December 30, 2000 and December 25, 1999, respectively.

Property and Equipment: We record our purchases of property and equipment at cost. We record depreciation and amortization in a manner that recognizes the cost of our depreciable assets in operations over their estimated useful lives using straight-line or accelerated methods. We estimate the useful lives of our depreciable assets to be 10-30 years for buildings and 3-10 years for furniture, fixtures and equipment. We amortize our leasehold improvements over the shorter of the terms of the underlying leases, including probable renewal periods, or the estimated useful lives of the improvements.

Investments: All of our investments, except those which are consolidated or accounted for under the equity method, are classified as “available for sale” under the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Accordingly, we report our investments at fair value if fair value can be determined; otherwise, the investment is recorded at cost. Under SFAS No. 115, fluctuations in fair value of investments classified as “available for sale” are included as a separate component of stockholders’ equity, net of applicable taxes. Permanent declines in the value of these investments are recognized in earnings in the period the impairment is determined. At December 30, 2000, we held investments in ten unrelated Internet-based companies and in a venture capital fund. The carrying amount of these investments was $29.9 million at December 30, 2000, compared to $152.0 million at December 25, 1999. The decline in value resulted from investment sales and impairments recorded in 2000 (see Note D). All of these investments, which are included in other assets, are classified as long-term on our 2000 Consolidated Balance Sheet.

Goodwill: Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses we have acquired under the purchase method of accounting. We amortize our goodwill on a straight-line basis, generally over 40 years, which is the maximum period allowed. The accumulated amortization of our goodwill was $52.1 million and $44.5 million as of December 30, 2000 and December 25, 1999, respectively. We continually evaluate whether recent events or circumstances have occurred that would indicate that the remaining useful life of the goodwill has changed or that the remaining balance of goodwill may not be recoverable. In 2000, we determined that a portion of the goodwill balance related to the acquisition of our Japanese operations was impaired (see Note D).

Impairment of Long-Lived Assets: In accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We evaluate for impairment at the location level and use the estimated undiscounted cash flows over the remaining life in determining if impairment exists. In 2000, we recorded impairment charges related to certain fixed assets (see Note D). We have also recognized impairment losses in association with merger and restructuring (see Note B) and store closure and relocation activities (see Note C). Measurement of an impairment loss for such long-lived assets is based on the fair value of the asset less any costs to sell that asset.

Fair Value of Financial Instruments: SFAS No. 107, “Disclosure about Fair Value of Financial Instruments,” requires that we dis-close the fair value of our financial instruments when it is practical to estimate. We have determined the estimated fair values of our financial instruments, which are either recognized in our Consolidated Balance Sheets or disclosed within these Notes to our Consolidated Financial Statements, using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates we have presented are not necessarily indicative of the amounts we could realize in a current market exchange.

Short-term assets and liabilities: The fair values of our cash and cash equivalents, receivables and accounts payable approximate their carrying values because of their short-term nature.

Investments: We use quoted market prices, if available, to determine the fair value of our long-term investments. Most of our long-term investments are in closely held corporations, and quoted market prices are not available. However, during 2000, we determined that significant events occurred, which required us to perform an evaluation of these non-public companies.