SEC Comment Letter for GAP INC (GAP) (CIK 0000039911) (GAP) — Nov 9, 2005
GAP INC (GAP) (CIK 0000039911)
Date: Nov. 9, 2005 · CIK: 0000039911 · Accession: 0000000000-05-056913
AI Filing Summary & Sentiment
Letter
November 8, 2005 By Facsimile and U.S. Mail Mr. Paul S. Pressler President and Chief Executive Officer The Gap, Inc. Two Folsom Street San Francisco, CA 94105
Re: The Gap, Inc. Form 10-K for Fiscal Year Ended January 29, 2005 Filed March 28, 2005 File No. 1-7562 Form 10-Q for Fiscal Quarter Ended July 30, 2005 Filed September 1, 2005 File No. 1-7562
Dear Mr. Pressler:
We have reviewed the above referenced filings and have the following comments. Where indicated, we think you should revise your documents in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments.
Please understand the purpose of our review is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Paul S. Pressler The Gap, Inc. Novem ber 8, 2005 Page 2
Form 10-K for Fiscal Year Ended January 29, 2005 Part IV, page 12 Item 15-Exhibits and Financial Statem ent Schedules, page 12 Report of Independent Registered Public Accounting Firm , page 40
1. Electronic subm issions are required to contain signatures in typed form rather than m anual form at. See Rule 302(a) of Regulation S-T. Please revise the report of your independent public accounting firm in future filings to include “/s/” to represent the electronic signature.
Consolidated Balance Sheets, page 42
2. As of your balance sheet dates please tell us the am ounts due from credit card, debit card and electronic benefit transfer transactions and where these am ounts are classified in your consolidated balance sheets and statem ents of cash flow. Include a discussion of your accounting policy for these transactions and the applicable accounting guidance.
3. Please tell us why you present a subtotal for cash and cash equivalents, short-term investm ents and restricted cash in your consolidated balance sheets. Include in your response why this is a m eaningful segregation within the classification of current assets and if this is supportable by any authoritative accounting guidance. If after further consideration you decide to revise future annual and interim filings to exclude this subtotal, please state so in your response.
4. Please advise or revise your future filings to include a disclosure listing the components of accrued expenses and other liabilities as of the dates of your consolidated balance sheets. Please provide us with an exam ple of this revised disclosure in your response.
Notes to Consolidated Financial Statem ents, page 46 Note A: Sum mary of Significant Accounting Policies, page 46
5. Please tell us how you determ ined key m oney is a non-am ortized indefinite life intangible asset and include any applicable accounting pronouncem ents to support this accounting treatm ent. Also tell us if key m oney represents the rights to currently existing store leases or the right to enter into store leases in the f uture. Please address the term of the autom atic renewal rights and also, tell us if the key money is refundable or non-refundable and the conditions that would cause the amounts to becom e refundable, if applicable. Tell us what consideration you gave to treating the key m oney paym ents as prepaid rent.
Mr. Paul S. Pressler The Gap, Inc. Novem ber 8, 2005 Page 3
6. In future filings please specifically address your accounting policies for catalog and direct response advertising within your advertising policy note. Please describe your policy including your basis for capitalization, m anagem ent’s assum ptions for an expected life and tell us the am ounts, if any, that rem ain on your consolidated balance sheets. Further, if you have capitalized costs, please advise and revise your future filings to disclose the am ounts reported as assets in each balance sheet. In your response please show us what your disclosure will look like revised.
7. We note the GapCard cardholders receive discounts and rewards in exchange for a prescribed am ount of purchases. Please tell us how you account for the existing discounts and reward arrangem ents and include any applicable accounting guidance to support your accounting treatm ent. Tell us where you classify the costs for these arrangem ents in your consolidated incom e statem ents and how much cost you recognized in each of the three fiscal years ended 2004. Also tell us if m anagem ent makes any subjective estim ates to allocate the cost of honoring unearned discounts or rewards and the basis for developing these estim ates.
8. Tell us the am ount of finance charges recognized on credit sales in fiscal years 2004, 2003 and 2002. Please advise or revise your future filings to include the disclosure required by SAB Topic 8.B., if applicable. In your response please show us what your disclosure will look like revised.
Note M: Segm ent Inform ation, page 63
9. Please tell us how you identify product categories for retail and online stores or alternatively, tell us why it is im practicable to do so. For product categories that can be identified you are required to disclose the am ount or percentage of net sales contributed by each category that accounted for 10% or m ore of consolidated revenue in any of the last three years as required by Item 101(c)(i) of Regulation S-K. You are also required to disclose revenues for each product category in the notes to your financial statem ents as required by paragraph 37 of SFAS 131. Please advise or revise your disclosures to include the net sales in both dollar value and as a percentage to consolidated net sales for each identified product category in the three fiscal years ended 2004. In your response please show us what your disclosure will look like revised.
Mr. Paul S. Pressler The Gap, Inc. Novem ber 8, 2005 Page 4
Form 10-Q for Fiscal Quarter Ended July 30, 2005 Other Operating Charges, page 11
10. Please explain the variance between the $69 m illion change in provision for sublease loss reserves and the $58 m illion reversal related to vacant properties. If the variance represents adjustm ents in addition to the $58 m illion reversal, please tell us the underlying reasons for each separate adjustm ent within the overall sublease loss reserve. See paragraph 20.b.(2) of SFAS No. 146.
As appropriate, please am end your filing and respond to these com ments within 10 business days, or tell us when you will provide us with a response. You m ay wish to provide us with m arked copies of the am endm ent to expedite our review. Please furnish a cover letter with your am endm ent that keys your responses to our com ments and provides any requested inform ation. Detailed letters greatly facilitate our review. File your response on EDGAR as a correspondence file. Please understand that we m ay have additional com ments after reviewing your responses to our com ments.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing reviewed by the staff to be certain that they have provided all inform ation investors require for an inform ed decision. Since the com pany and its managem ent are in possession of all facts relating to a com pany’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have m ade.
In connection with responding to our com ments, please provide, in writing, a statem ent from the com pany acknowledging that:
the com pany is responsible for the adequacy and accuracy of the disclosure in the filing;
staff com ments or changes to disclosure in response to staff com ments do not foreclose the Com mission from taking any action with respect to the filing; and
the com pany m ay not assert staff com ments as a defense in any proceeding initiated by the Com mission or any person under the federal securities laws of the United States.
In addition, please be advised that the Division of Enforcem ent has access to all inform ation you provide to the staff of th e Division of Corporation Finance in our review of your filing or in response to our com ments on your filing.
Mr. Paul S. Pressler The Gap, Inc. Novem ber 8, 2005 Page 5
You m ay contact Brian McAllister, Staff Accountant at (202) 551-3341, Donna Di Silvio at (202) 551-3202, or m e at (202) 551-3841 if you have any questions regarding comments on the financial statem ents and related m atters.
S incerely,
M ichael Moran Accounting Branch Chief
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Mail Stop 3561
November 8, 2005
By Facsimile and U.S. Mail
Mr. Paul S. Pressler
President and Chief Executive Officer
The Gap, Inc.
Two Folsom Street
San Francisco, CA 94105
Re: The Gap, Inc.
Form 10-K for Fiscal Year Ended January 29, 2005
Filed March 28, 2005
File No. 1-7562
Form 10-Q for Fiscal Quarter Ended July 30, 2005
Filed September 1, 2005
File No. 1-7562
Dear Mr. Pressler:
We have reviewed the above referenced filings and have the following comments.
Where indicated, we think you should revise your documents in response to these
comments. If you disagree, we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with information
so we may better understand your disclosure. After reviewing this information, we may
raise additional comments.
Please understand the purpose of our review is to assist you in your compliance
with the applicable disclosure requirements and to enhance the overall disclosure in your
filing. We look forward to working with you in these respects. We welcome any
questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Paul S. Pressler
The Gap, Inc.
Novem ber 8, 2005
Page 2
Form 10-K for Fiscal Year Ended January 29, 2005
Part IV, page 12
Item 15-Exhibits and Financial Statem ent Schedules, page 12
Report of Independent Registered Public Accounting Firm , page 40
1. Electronic subm issions are required to contain signatures in typed form rather
than m anual form at. See Rule 302(a) of Regulation S-T. Please revise the report
of your independent public accounting firm in future filings to include “/s/” to
represent the electronic signature.
Consolidated Balance Sheets, page 42
2. As of your balance sheet dates please tell us the am ounts due from credit card,
debit card and electronic benefit transfer transactions and where these am ounts
are classified in your consolidated balance sheets and statem ents of cash flow.
Include a discussion of your accounting policy for these transactions and the
applicable accounting guidance.
3. Please tell us why you present a subtotal for cash and cash equivalents, short-term
investm ents and restricted cash in your consolidated balance sheets. Include in
your response why this is a m eaningful segregation within the classification of
current assets and if this is supportable by any authoritative accounting guidance.
If after further consideration you decide to revise future annual and interim filings
to exclude this subtotal, please state so in your response.
4. Please advise or revise your future filings to include a disclosure listing the
components of accrued expenses and other liabilities as of the dates of your
consolidated balance sheets. Please provide us with an exam ple of this revised
disclosure in your response.
Notes to Consolidated Financial Statem ents, page 46
Note A: Sum mary of Significant Accounting Policies, page 46
5. Please tell us how you determ ined key m oney is a non-am ortized indefinite life
intangible asset and include any applicable accounting pronouncem ents to support
this accounting treatm ent. Also tell us if key m oney represents the rights to
currently existing store leases or the right to enter into store leases in the f uture.
Please address the term of the autom atic renewal rights and also, tell us if the key
money is refundable or non-refundable and the conditions that would cause the
amounts to becom e refundable, if applicable. Tell us what consideration you
gave to treating the key m oney paym ents as prepaid rent.
Mr. Paul S. Pressler
The Gap, Inc.
Novem ber 8, 2005
Page 3
6. In future filings please specifically address your accounting policies for catalog
and direct response advertising within your advertising policy note. Please
describe your policy including your basis for capitalization, m anagem ent’s
assum ptions for an expected life and tell us the am ounts, if any, that rem ain on
your consolidated balance sheets. Further, if you have capitalized costs, please
advise and revise your future filings to disclose the am ounts reported as assets in
each balance sheet. In your response please show us what your disclosure will
look like revised.
7. We note the GapCard cardholders receive discounts and rewards in exchange for
a prescribed am ount of purchases. Please tell us how you account for the existing
discounts and reward arrangem ents and include any applicable accounting
guidance to support your accounting treatm ent. Tell us where you classify the
costs for these arrangem ents in your consolidated incom e statem ents and how
much cost you recognized in each of the three fiscal years ended 2004. Also tell
us if m anagem ent makes any subjective estim ates to allocate the cost of honoring
unearned discounts or rewards and the basis for developing these estim ates.
8. Tell us the am ount of finance charges recognized on credit sales in fiscal years
2004, 2003 and 2002. Please advise or revise your future filings to include the
disclosure required by SAB Topic 8.B., if applicable. In your response please
show us what your disclosure will look like revised.
Note M: Segm ent Inform ation, page 63
9. Please tell us how you identify product categories for retail and online stores or
alternatively, tell us why it is im practicable to do so. For product categories that
can be identified you are required to disclose the am ount or percentage of net
sales contributed by each category that accounted for 10% or m ore of
consolidated revenue in any of the last three years as required by Item 101(c)(i) of
Regulation S-K. You are also required to disclose revenues for each product
category in the notes to your financial statem ents as required by paragraph 37 of
SFAS 131. Please advise or revise your disclosures to include the net sales in
both dollar value and as a percentage to consolidated net sales for each identified
product category in the three fiscal years ended 2004. In your response please
show us what your disclosure will look like revised.
Mr. Paul S. Pressler
The Gap, Inc.
Novem ber 8, 2005
Page 4
Form 10-Q for Fiscal Quarter Ended July 30, 2005
Other Operating Charges, page 11
10. Please explain the variance between the $69 m illion change in provision for
sublease loss reserves and the $58 m illion reversal related to vacant properties. If
the variance represents adjustm ents in addition to the $58 m illion reversal, please
tell us the underlying reasons for each separate adjustm ent within the overall
sublease loss reserve. See paragraph 20.b.(2) of SFAS No. 146.
As appropriate, please am end your filing and respond to these com ments within
10 business days, or tell us when you will provide us with a response. You m ay wish to
provide us with m arked copies of the am endm ent to expedite our review. Please furnish
a cover letter with your am endm ent that keys your responses to our com ments and
provides any requested inform ation. Detailed letters greatly facilitate our review. File
your response on EDGAR as a correspondence file. Please understand that we m ay have
additional com ments after reviewing your responses to our com ments.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing reviewed by the staff to be certain that they have provided all
inform ation investors require for an inform ed decision. Since the com pany and its
managem ent are in possession of all facts relating to a com pany’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have m ade.
In connection with responding to our com ments, please provide, in writing, a
statem ent from the com pany acknowledging that:
the com pany is responsible for the adequacy and accuracy of the disclosure in the
filing;
staff com ments or changes to disclosure in response to staff com ments do not
foreclose the Com mission from taking any action with respect to the filing; and
the com pany m ay not assert staff com ments as a defense in any proceeding
initiated by the Com mission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of Enforcem ent has access to all
inform ation you provide to the staff of th e Division of Corporation Finance in our
review of your filing or in response to our com ments on your filing.
Mr. Paul S. Pressler
The Gap, Inc.
Novem ber 8, 2005
Page 5
You m ay contact Brian McAllister, Staff Accountant at (202) 551-3341, Donna
Di Silvio at (202) 551-3202, or m e at (202) 551-3841 if you have any questions regarding
comments on the financial statem ents and related m atters.
S incerely,
M ichael Moran
Accounting Branch Chief