SEC Comment Letter for COSTCO WHOLESALE (COST) — May 25, 2012
COSTCO WHOLESALE CORP /NEW (COST) (CIK 0000909832)
Date: May 25, 2012 · CIK: 0000909832 · Accession: 0000000000-12-027343
AI Filing Summary & Sentiment
Reasoning
Letter
May 25, 2012 Via E-mail Richard A. Galanti Executive Vice President, Chief Financial Officer Costco Wholesale Corporation 999 Lake Drive Issaquah, WA 98027 Re: Costco Wholesale Corporation Form 10-K for the Fiscal Year Ended August 28, 2011 Filed October 14, 2011 Response dated May 18, 2012 File No. 0-20355
Dear Mr. Galanti: We have reviewed your response and have th e following additional comment. In our comment, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comment applies to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response.
After reviewing any amendment to your filing and the information you provide in response to this comment, we may have additional comments. Form 10-K for the Fiscal Year Ended August 28, 2011
Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 21 Results of Operations, page 22
1. We read your response to comment 1. We note you tracked merchandise inventory and the related cost of sales primarily using the first-in, first-out (FIF O) method, and that you account for your US merchandise inventory on a last-in, first-out (LIFO) basis for financial reporting purposes by recording LI FO adjustments in an inflationary cost environment. In this regard, advise us how you compute the LIFO adjustments in light of the different LIFO pools you have to mainta in for LIFO inventor y basis, but not for FIFO inventory basis. Provide us an example in your response to show how this process
Richard A. Galanti Costco Wholesale Corporation May 25, 2012 Page 2
works. Further, please explain to us in de tail how FIFO costs ar e representative of market, especially in a deflationary envir onment where LIFO inventory cost would be higher than the FIFO inventory cost. In this regard, please clarify for us why you believe FIFO approximates market in a deflationary en vironment in the lower of cost or market test in your situation. Pleas e note that market, as defi ned in ASC 330-10-20, means current replacement cost provided it shall not exceed net realizable value and it shall not be less than net realizable value reduced by allowance for an approximately normal profit margin. Please explain.
You may contact Robert Babul a, Staff Accountant, at ( 202) 551-3339 or me at (202) 551- 3377 if you have questions regarding our comment or any other questions.
Sincerely,
/s/ Andrew D. Mew
Andrew D. Mew Accounting Branch Chief
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May 25, 2012
Via E-mail
Richard A. Galanti Executive Vice President, Chief Financial Officer Costco Wholesale Corporation 999 Lake Drive Issaquah, WA 98027
Re: Costco Wholesale Corporation
Form 10-K for the Fiscal Year Ended August 28, 2011
Filed October 14, 2011 Response dated May 18, 2012 File No. 0-20355
Dear Mr. Galanti:
We have reviewed your response and have th e following additional comment. In our
comment, we may ask you to provide us with information so we may better understand your
disclosure.
Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advi sing us when you will provide the requested
response. If you do not believe our comment applies to your fact s and circumstances or do not
believe an amendment is appropriate, pl ease tell us why in your response.
After reviewing any amendment to your filing and the information you provide in
response to this comment, we may have additional comments. Form 10-K for the Fiscal Year Ended August 28, 2011
Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations, page 21
Results of Operations, page 22
1. We read your response to comment 1. We note you tracked merchandise inventory and
the related cost of sales primarily using the first-in, first-out (FIF O) method, and that you
account for your US merchandise inventory on a last-in, first-out (LIFO) basis for
financial reporting purposes by recording LI FO adjustments in an inflationary cost
environment. In this regard, advise us how you compute the LIFO adjustments in light
of the different LIFO pools you have to mainta in for LIFO inventor y basis, but not for
FIFO inventory basis. Provide us an example in your response to show how this process
Richard A. Galanti Costco Wholesale Corporation May 25, 2012 Page 2
works. Further, please explain to us in de tail how FIFO costs ar e representative of
market, especially in a deflationary envir onment where LIFO inventory cost would be
higher than the FIFO inventory cost. In this regard, please clarify for us why you believe
FIFO approximates market in a deflationary en vironment in the lower of cost or market
test in your situation. Pleas e note that market, as defi ned in ASC 330-10-20, means
current replacement cost provided it shall not exceed net realizable value and it shall not be less than net realizable value reduced by allowance for an approximately normal profit
margin. Please explain.
You may contact Robert Babul a, Staff Accountant, at ( 202) 551-3339 or me at (202) 551-
3377 if you have questions regarding our comment or any other questions.
Sincerely,
/s/ Andrew D. Mew
Andrew D. Mew Accounting Branch Chief