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1. Summary of Significant Accounting Policies
Description of Business
Best Buy Co., Inc. is a specialty retailer with fiscal 2003 revenue from
continuing operations of $20.9 billion. We operate two reportable
segments: Domestic and International. The Domestic segment includes U.S.
Best Buy and Magnolia Hi-Fi, Inc. (Magnolia Hi-Fi) stores. U.S. Best Buy
stores offer a wide variety of consumer electronics, home-office
equipment, entertainment software and appliances, operating 548 stores
in 48 states at the end of fiscal 2003. Magnolia Hi-Fi is a high-end
retailer of audio and video products with 19 stores in Washington,
Oregon and California. Magnolia Hi-Fi was acquired in the fourth quarter
of fiscal 2001. The International segment is comprised of 104 Future
Shop and eight Canadian Best Buy stores. Future Shop and Canadian Best
Buy stores offer products similar to U.S. Best Buy stores. Future Shop
operates in all Canadian provinces, while all of the Canadian Best Buy
stores are in Ontario. Future Shop was acquired in the third quarter of
fiscal 2002. As described in note 2, we have classified the results of
operations of Musicland as discontinued operations. The Musicland
business was previously included in our Domestic segment. The Notes to
Consolidated Financial Statements, except where otherwise indicated,
relate to continuing operations only. Musicland, principally a
mall-based retailer of prerecorded home entertainment products, was
acquired in the fourth quarter of fiscal 2001.
Basis of
Presentation
The consolidated financial statements include the accounts of Best Buy
Co., Inc. and its subsidiaries. We have eliminated significant
intercompany accounts and transactions. All subsidiaries are wholly
owned.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
in the consolidated balance sheets and statements of earnings, as well
as the disclosure of contingent liabilities. Actual results could differ
from these estimates and assumptions.
Fiscal Year
Our fiscal year ends on the Saturday nearest the end of February. Fiscal
2003 and 2002 each included 52 weeks, while fiscal 2001 included 53
weeks.
Cash and Cash Equivalents
We consider highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents. We carry these investments
at cost, which approximates market value.
Recoverable Costs from Developed Properties
We include in current assets the costs of acquisition and development of
properties that we intend to sell and lease back or recover from
landlords within one year.
Merchandise Inventories
Merchandise inventories are recorded at the lower of cost or market. The
methods we use to determine cost are the average cost and retail
inventory methods.
Property and Equipment
Property and equipment are recorded at cost. We compute depreciation
using the straight-line method over the estimated useful lives of the
assets or, in the case of leasehold improvements, over the shorter of
the estimated useful lives or lease terms.
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