Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...

Net Accounts ReceivableA reserve for trade discounts is established based on open invoices where tradediscounts have been extended to customers and is treated as a reduction of sales.Estimated customer end of season allowances (also referred to as customer markdowns)are included as a reduction of sales. Costs associated with potential returns of productsare included as a reduction of sales. These reserves are based on current informationregarding retail performance, historical experience and an evaluation of current marketconditions.Net InventoriesInventories, net are stated at lower of cost (using the first-in-first-out method,“FIFO”) or market. The Company continually evaluates the composition of itsinventories assessing slow-turning, ongoing product as well as all fashion product.Net Goodwill and other IntangiblesSFAS No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill andintangible assets with indefinite lives no longer be amortized, but rather be tested, at leastannually, for impairment.Accrued ExpensesAccrued expenses for employee insurance, workers’ compensation, contractedadvertising, professional fees, and other outstanding Company obligations are assessedbased on claims experience and statistical trends, open contractual obligations, andestimates based on projections and current requirements.DerivativesSFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” asamended and interpreted, requires that each derivative instrument (including certainderivative instruments embedded in other contracts) be recorded in the balance sheet aseither an asset or liability and measured at its fair value. The statement also requires that15