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Document and Entity Information (USD $)
12 Months Ended
Sep. 01, 2013
Oct. 09, 2013
Feb. 17, 2013
Document and Entity Information [Abstract]
Document Type 10-K
Amendment Flag false
Document Period End Date Sep 1, 2013
Document Fiscal Year Focus 2013
Document Fiscal Period Focus FY
Trading Symbol COST
Entity Registrant Name COSTCO WHOLESALE CORP /NEW
Entity Central Index Key 0000909832
Current Fiscal Year End Date --09-01
Entity Well-known Seasoned Issuer Yes
Entity Current Reporting Status Yes
Entity Voluntary Filers No
Entity Filer Category Large Accelerated Filer
Entity Common Stock, Shares Outstanding 436,922,037
Entity Public Float $ 44,218,428,626
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Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
CURRENT ASSETS
Cash and cash equivalents $ 4,644 $ 3,528
Short-term investments 1,480 1,326
Receivables, net 1,201 1,026
Merchandise inventories 7,894 7,096
Deferred income taxes and other current assets 621 550
Total current assets 15,840 13,526
PROPERTY AND EQUIPMENT
Land 4,409 4,032
Buildings and improvements 11,556 10,879
Equipment and fixtures 4,472 4,261
Construction in progress 585 374
Gross property and equipment 21,022 19,546
Less accumulated depreciation and amortization (7,141) (6,585)
Net property and equipment 13,881 12,961
OTHER ASSETS 562 653
TOTAL ASSETS 30,283 27,140
CURRENT LIABILITIES
Accounts payable 7,872 7,303
Accrued salaries and benefits 2,037 1,832
Accrued member rewards 710 661
Accrued sales and other taxes 382 397
Deferred membership fees 1,167 1,101
Other current liabilities 1,089 966
Total current liabilities 13,257 12,260
LONG-TERM DEBT, excluding current portion 4,998 1,381
DEFERRED INCOME TAXES AND OTHER LIABILITIES 1,016 981
Total liabilities 19,271 14,622
COMMITMENTS AND CONTINGENCIES      
EQUITY
Preferred stock $.005 par value; 100,000,000 shares authorized; no shares issued and outstanding 0 0
Common stock $.005 par value; 900,000,000 shares authorized; 436,839,000 and 432,350,000 shares issued and outstanding 2 2
Additional paid-in capital 4,670 4,369
Accumulated other comprehensive (loss) income (122) 156
Retained earnings 6,283 7,834
Total Costco stockholders' equity 10,833 12,361
Noncontrolling interests 179 157
Total equity 11,012 12,518
TOTAL LIABILITIES AND EQUITY $ 30,283 $ 27,140
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Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 01, 2013
Sep. 02, 2012
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share) $ 0.005 $ 0.005
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (in dollars per share) $ 0.005 $ 0.005
Common stock, shares authorized 900,000,000 900,000,000
Common stock, shares issued 436,839,000 432,350,000
Common stock, shares outstanding 436,839,000 432,350,000
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Consolidated Statements Of Income (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
REVENUE
Net sales $ 23,552 $ 24,343 $ 23,204 $ 21,849 $ 22,508 $ 21,181 $ 31,771 $ 31,524 $ 102,870 $ 97,062 $ 87,048
Membership fees 531 528 511 475 459 447 716 694 2,286 2,075 1,867
Total revenue 24,083 24,871 23,715 22,324 22,967 21,628 32,487 32,218 105,156 99,137 88,915
OPERATING EXPENSES
Merchandise costs 21,038 21,766 20,726 19,543 20,139 18,931 28,418 28,210 91,948 86,823 77,739
Selling, general and administrative 2,313 2,361 2,332 2,152 2,178 2,144 [1] 3,098 3,044 10,104 9,518 8,691
Preopening expenses 10 6 18 6 6 10 17 15 51 37 46
Operating income 722 738 639 623 644 543 954 949 3,053 2,759 2,439
OTHER INCOME (EXPENSE)
Interest expense (25) (25) (13) (19) (27) (27) (36) (22) (99) (95) (116)
Interest income and other, net 15 26 20 18 10 37 36 38 97 103 60
INCOME BEFORE INCOME TAXES 712 739 646 622 627 553 954 965 3,051 2,767 2,383
Provision for income taxes 248 185 [2] 225 217 215 225 [3] 332 343 990 1,000 841
Net income including noncontrolling interests 464 554 421 405 412 328 622 622 2,061 1,767 1,542
Net income attributable to noncontrolling interests (5) (7) (5) (19) (18) (8) (5) (13) (22) (58) (80)
NET INCOME ATTRIBUTABLE TO COSTCO $ 459 $ 547 $ 416 $ 386 $ 394 $ 320 $ 617 $ 609 $ 2,039 $ 1,709 $ 1,462
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
Basic (in dollars per share) $ 1.05 $ 1.26 $ 0.96 $ 0.89 $ 0.91 $ 0.74 $ 1.41 $ 1.41 $ 4.68 $ 3.94 $ 3.35
Diluted (in dollars per share) $ 1.04 $ 1.24 $ 0.95 $ 0.88 $ 0.9 $ 0.73 $ 1.4 $ 1.39 $ 4.63 $ 3.89 $ 3.3
Shares used in calculation (000's)
Basic (shares) 436,488 435,975 433,423 433,791 434,535 434,222 436,752 432,437 435,741 433,620 436,119
Diluted (shares) 440,780 439,812 438,643 439,166 439,468 440,615 441,907 438,344 440,512 439,373 443,094
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.31 $ 7.275 [4] $ 0.275 $ 0 [5] $ 0.24 $ 0.24 $ 0.31 $ 0.55 [6] $ 8.17 $ 1.03 $ 0.89
[1] Includes a $17 charge to selling, general and administrative for contributions to an initiative reforming alcohol beverage laws in Washington State.
[2] Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
[3] Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
[4] Includes the special cash dividend of $7.00 per share paid in December 2012.
[5] On May 9, 2012, subsequent to the end of the third quarter of 2012, the Board of Directors declared a quarterly cash dividend of $0.275 per share.
[6] The quarterly dividend rate was $0.275 per share.
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Consolidated Statements Of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Statement of Comprehensive Income [Abstract]
NET INCOME INCLUDING NONCONTROLLING INTERESTS $ 2,061 $ 1,767 $ 1,542
Foreign-currency translation adjustment and other, net (278) (96) 275
Comprehensive income 1,783 1,671 1,817
Less: Comprehensive income attributable to noncontrolling interests 22 24 104
COMPREHENSIVE INCOME ATTRIBUTABLE TO COSTCO $ 1,761 $ 1,647 $ 1,713
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Consolidated Statements of Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Total Costco Stockholders' Equity [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income (Loss)
Retained Earnings [Member]
Noncontrolling Interests
Equity at beginning of period at Aug. 29, 2010 $ 10,930 $ 10,829 $ 2 $ 4,115 $ 122 $ 6,590 $ 101
Common stock at beginning of period (shares) at Aug. 29, 2010 433,510,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Initial consolidation of noncontrolling interest in Costco Mexico 357 0 357
Net income 1,542 1,462 1,462 80
Foreign-currency translation adjustment and other, net 275 251 251 24
Stock-based compensation 207 207 207
Stock options exercised, including tax effects (shares) 7,245,000
Stock options exercised, including tax effects 332 332 0 332
Release of vested RSUs, including tax effects (shares) 2,385,000
Release of vested RSUs, including tax effects (51) (51) 0 (51)
Conversion of convertible notes (shares) 65,000
Conversion of convertible notes 2 2 0 2
Repurchased of common stock (shares) (8,939,000) (8,939,000)
Repurchases of common stock (641) (641) 0 (89) (552)
Cash dividends declared (389) (389) (389)
Investment by noncontrolling interest 9 9
Equity at end of period at Aug. 28, 2011 12,573 12,002 2 4,516 373 7,111 571
Common stock at end of period (shares) at Aug. 28, 2011 434,266,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 1,767 1,709 1,709 58
Foreign-currency translation adjustment and other, net (96) (62) (62) (34)
Stock-based compensation 241 241 241
Stock options exercised, including tax effects (shares) 2,756,000
Stock options exercised, including tax effects 142 142 0 142
Release of vested RSUs, including tax effects (shares) 2,554,000
Release of vested RSUs, including tax effects (76) (76) 0 (76)
Conversion of convertible notes (shares) 46,000
Conversion of convertible notes 2 2 0 2
Repurchased of common stock (shares) (7,272,000) (7,272,000)
Repurchases of common stock (617) (617) 0 (77) (540)
Cash dividends declared (446) (446) (446)
Distributions to noncontrolling interest (183) (183)
Purchase of noncontrolling interest in Costco Mexico (789) (534) (379) (155) (255)
Equity at end of period at Sep. 02, 2012 12,518 12,361 2 4,369 156 7,834 157
Common stock at end of period (shares) at Sep. 02, 2012 432,350,000 432,350,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 2,061 2,039 2,039 22
Foreign-currency translation adjustment and other, net (278) (278) (278) 0
Stock-based compensation 285 285 285
Stock options exercised, including tax effects (shares) 1,435,000 1,435,000
Stock options exercised, including tax effects 75 75 0 75
Release of vested RSUs, including tax effects (shares) 2,609,000
Release of vested RSUs, including tax effects (85) (85) 0 (85)
Conversion of convertible notes (shares) 802,000
Conversion of convertible notes 30 30 0 30
Repurchased of common stock (shares) (357,000) (357,000)
Repurchases of common stock (34) (34) 0 (4) (30)
Cash dividends declared (3,560) (3,560) (3,560)
Equity at end of period at Sep. 01, 2013 $ 11,012 $ 10,833 $ 2 $ 4,670 $ (122) $ 6,283 $ 179
Common stock at end of period (shares) at Sep. 01, 2013 436,839,000 436,839,000
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Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests $ 2,061 $ 1,767 $ 1,542
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization 946 908 855
Stock-based compensation 285 241 207
Excess tax benefits on stock-based awards (61) (64) (45)
Other non-cash operating activities, net (7) 28 23
Deferred income taxes 7 (3) 84
Changes in operating assets and liabilities, net of the initial consolidation of Costco Mexico at the beginning of fiscal 2011:
Increase in merchandise inventories (898) (490) (642)
Increase in accounts payable 718 338 804
Other operating assets and liabilities, net 386 332 370
Net cash provided by operating activities 3,437 3,057 3,198
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (2,572) (2,048) (3,276)
Maturities of short-term investments 2,141 1,821 2,614
Sales of investments 244 482 602
Additions to property and equipment (2,083) (1,480) (1,290)
Increase resulting from initial consolidation of Costco Mexico 0 0 165
Other investing activities, net 19 (11) 5
Net cash used in investing activities (2,251) (1,236) (1,180)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in bank checks outstanding (70) 457 (514)
Repayments of short-term borrowings (287) (114) (105)
Proceeds from short-term borrowings 326 114 79
Proceeds from issuance of long-term debt 3,717 130 0
Repayments of long-term debt 0 (900) 0
(Distribution to) investment by noncontrolling interests (22) (161) 9
Proceeds from exercise of stock options 52 109 285
Minimum tax withholdings on stock-based awards (121) (107) (61)
Excess tax benefits on stock-based awards 61 64 45
Repurchases of common stock (36) (632) (624)
Cash dividend payments (3,560) (446) (389)
Purchase of noncontrolling interest in Costco Mexico 0 (789) 0
Other financing activities, net (16) (6) (2)
Net cash provided by (used in) financing activities 44 (2,281) (1,277)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (114) (21) 54
Net increase (decrease) in cash and cash equivalents 1,116 (481) 795
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 3,528 4,009 3,214
CASH AND CASH EQUIVALENTS END OF PERIOD 4,644 3,528 4,009
Cash paid during the first thirty-six weeks of year for:
Interest (reduced by $12, $10 and $9 interest capitalized in 2013, 2012 and 2011, respectively) 86 112 111
Income taxes 1,001 956 742
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in accrued property and equipment 40 0 0
Property acquired under capital lease 11 18 0
Unsettled repurchases of common stock 0 2 17
Cash dividend declared, but not yet paid 0 22 0
Common stock issued upon conversion of 3.5% Zero Coupon Convertible Subordinated Notes $ 30 $ 2 $ 2
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Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Statement of Cash Flows [Abstract]
Interest, interest capitalized $ 12 $ 10 $ 9
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Summary of Significant Accounting Policies
12 Months Ended
Sep. 01, 2013
Accounting Policies [Abstract]
Summary of Significant Policies
Summary of Significant Accounting Policies
Description of Business
Costco Wholesale Corporation (Costco or the Company), a Washington corporation, and its subsidiaries operate membership warehouses based on the concept that offering members low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover. At September 1, 2013, Costco operated 634 warehouses worldwide: 451 United States (U.S.) locations (in 41 U.S. states, Washington, D.C., and Puerto Rico), 85 Canadian locations, 33 Mexico locations, 25 United Kingdom (U.K.) locations, 18 Japan locations, 10 Taiwan locations, 9 Korea locations, and 3 Australia locations. The Company's online business operates websites in the U.S., Canada, and the U.K.
Basis of Presentation
The consolidated financial statements include the accounts of Costco Wholesale Corporation, its wholly-owned subsidiaries, subsidiaries in which it has a controlling interest, consolidated entities in which it has made equity investments, or has other interests through which it has majority-voting control or it exercises the right to direct the activities that most significantly impact the entity’s performance. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries and other consolidated entities have been eliminated in consolidation. In July 2012, Costco purchased its former joint venture partner’s 50% equity interest in Costco Mexico. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Mexico prior to the July 2012 acquisition of the 50% noncontrolling interest, Taiwan, and Korea. Subsequent to the acquisition date, 100% of Mexico’s operations are included in “net income attributable to Costco.” Unless otherwise noted, references to net income relate to net income attributable to Costco.
In 2011 and prior to the July 2012 acquisition of the 50% noncontrolling interest in Mexico, the financial position and results of Mexico’s operations were fully consolidated, and the joint venture partner’s share was included in “net income attributable to noncontrolling interests” due to the adoption of a new accounting standard. The initial consolidation of Mexico increased total assets, liabilities, and revenue by approximately 3%, with no impact on net income or net income per common share attributable to Costco. The Company’s equity method investment in Mexico as of August 29, 2010 was derecognized and the noncontrolling interest in Mexico totaling $357 was recognized as part of the initial consolidation of the joint venture on August 30, 2010 as shown in the accompanying consolidated statements of equity.
Fiscal Year End
The Company operates on a 52/53 week fiscal year basis with the fiscal year ending on the Sunday closest to August 31. References to 2013 relate to the 52-week fiscal year ended September 1, 2013. References to 2012 and 2011 relate to the 53-week and 52-week fiscal years ended September 2, 2012 and August 28, 2011, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
Reclassifications
Certain reclassifications have been made to prior fiscal year amounts or balances to conform to the presentation in the current fiscal year. These reclassifications did not have a material impact on the Company’s previously reported consolidated financial statements.
Cash and Cash Equivalents
The Company considers as cash and cash equivalents all highly liquid investments with a maturity of three months or less at the date of purchase and proceeds due from credit and debit card transactions with settlement terms of up to one week. Credit and debit card receivables were $1,254 and $1,161 at the end of 2013 and 2012, respectively.
Short-Term Investments
In general, short-term investments have a maturity at the date of purchase of three months to five years. Investments with maturities beyond five years may be classified, based on the Company’s determination, as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations. Short-term investments classified as available-for-sale are recorded at fair value using the specific identification method with the unrealized gains and losses reflected in accumulated other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis and are recorded in interest income and other, net in the consolidated statements of income. Short-term investments classified as held-to-maturity are financial instruments that the Company has the intent and ability to hold to maturity and are reported net of any related amortization and are not remeasured to fair value on a recurring basis.
The Company periodically evaluates unrealized losses in its investment securities for other-than-temporary impairment, using both qualitative and quantitative criteria. In the event a security is deemed to be other-than-temporarily impaired, the Company recognizes the credit loss component in interest income and other, net in the consolidated statements of income. The majority of the Company’s investments are in debt securities.
Fair Value of Financial Instruments
The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Significant unobservable inputs that are not corroborated by market data.
The Company’s valuation techniques used to measure the fair value of money market mutual funds are based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Valuation methodologies used to measure the fair value of all other non-derivative financial instruments are based on “consensus pricing,” using market prices from a variety of industry-standard independent data providers or pricing that considers various assumptions, including time value, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. All are observable in the market or can be derived principally from or corroborated by observable market data, for which the Company typically receives independent external valuation information.
The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred.
The Company’s current financial liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums.
Receivables, Net
Receivables consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Vendor receivables
$
581

 
$
545

Reinsurance receivables
238

 
226

Receivables from governmental entities
228

 
87

Third-party pharmacy receivables
102

 
104

Other receivables, net
52

 
64

Receivables, net
$
1,201

 
$
1,026


 
Vendor receivables include payments from vendors in the form of volume rebates or other purchase discounts that are evidenced by signed agreements and are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount and as a component of merchandise costs as the merchandise is sold. Vendor receivable balances are generally presented on a gross basis, separate from any related payable due. In certain circumstances, these receivables may be settled against the related payable to that vendor. Other consideration received from vendors is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms of the related agreement, or by another systematic approach.
Reinsurance receivables are held by the Company’s wholly-owned captive insurance subsidiary. The receivable balance primarily represents amounts ceded through reinsurance arrangements, and are reflected on a gross basis, separate from the amounts assumed under reinsurance, which are presented on a gross basis within other current liabilities on the consolidated balance sheets. Receivables from governmental entities largely consist of tax-related items. Third-party pharmacy receivables generally relate to amounts due from members’ insurance companies for the amount above their co-pay, which is collected at the point-of-sale.
Receivables are recorded net of an allowance for doubtful accounts. Management determines the allowance for doubtful accounts based on historical experience and application of the specific identification method. Write-offs of receivables were immaterial for fiscal years 2013, 2012, and 2011.
Merchandise Inventories
Merchandise inventories consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
United States (primarily LIFO)
$
5,560

 
$
4,967

Foreign (FIFO)
2,334

 
2,129

Merchandise inventories
$
7,894

 
$
7,096


Merchandise inventories are valued at the lower of cost or market, as determined primarily by the retail inventory method, and are stated using the last-in, first-out (LIFO) method for substantially all U.S. merchandise inventories. Merchandise inventories for all foreign operations are primarily valued by the retail inventory method and are stated using the first-in, first-out (FIFO) method. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, when actual inflation rates and inventory levels have been determined.
Due to net deflationary trends in 2013, a benefit of $27 was recorded to merchandise costs, to reduce the cumulative LIFO valuation on merchandise inventories. Due to net inflationary trends in 2012 and 2011, merchandise inventories valued at LIFO were lower than FIFO, resulting in a charge to merchandise costs of $21 and $87, respectively. At the end of 2013 and 2012, the cumulative impact of the LIFO valuation on merchandise inventories was $81 and $108, respectively.
The Company provides for estimated inventory losses between physical inventory counts as a percentage of net sales, using estimates based on the Company’s experience. The provision is adjusted periodically to reflect the results of the actual physical inventory counts, which generally occur in the second and fourth fiscal quarters of the fiscal year. Inventory cost, where appropriate, is reduced by estimates of vendor rebates when earned or as the Company progresses towards earning those rebates, provided that they are probable and reasonably estimable.
Property and Equipment
Property and equipment are stated at cost. In general, new building additions are separated into components, each with its own estimated useful life, generally five to fifty years for buildings and improvements and three to twenty years for equipment and fixtures. Depreciation and amortization expense is computed using the straight-line method over estimated useful lives or the lease term, if shorter. Leasehold improvements made after the beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset or the remaining term of the initial lease plus any renewals that are reasonably assured at the date the leasehold improvements are made.
Repair and maintenance costs are expensed when incurred. Expenditures for remodels, refurbishments and improvements that add to or change the way an asset functions or that extend the useful life of an asset are capitalized. Assets that were removed during the remodel, refurbishment or improvement are retired. Assets classified as held for sale were not material at the end of 2013 or 2012.
The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances occur that may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the group’s net carrying value. In the event that the carrying value is not considered recoverable, an impairment loss would be recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held for sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or other valuation techniques. Impairment charges, included in selling, general and administrative expenses on the consolidated statements of income, in 2013, 2012, and 2011 were immaterial.
The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. These costs are included in equipment and fixtures, and amortized on a straight-line basis over the estimated useful lives of the software, generally three to seven years.
Other Assets
Other assets consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Prepaid rents, lease costs, and long-term deposits
$
236

 
$
230

Receivables from governmental entities
128

 
225

Cash surrender value of life insurance
74

 
76

Goodwill, net
63

 
66

Other
61

 
56

Other Assets
$
562

 
$
653


Receivables from governmental entities largely consists of various tax-related items including amounts deposited with taxing authorities in connection with ongoing income tax audits and non-current deferred tax assets. The Company adjusts the carrying value of its employee life insurance contracts to the net cash surrender value at the end of each reporting period. Goodwill resulting from certain business combinations is reviewed for impairment in the fourth quarter of each fiscal year, or more frequently if circumstances dictate. No impairment of goodwill has been incurred to date.
Accounts Payable
The Company’s banking system provides for the daily replenishment of major bank accounts as checks are presented. Included in accounts payable at the end of 2013 and 2012 are $493 and $565, respectively, representing the excess of outstanding checks over cash on deposit at the banks on which the checks were drawn.
Insurance/Self-Insurance Liabilities
The Company uses a combination of insurance and self-insurance mechanisms, including a wholly-owned captive insurance subsidiary and participation in a reinsurance pool, to provide for potential liabilities for workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, and employee health care benefits. Liabilities associated with the risks that are retained by the Company are not discounted and are estimated, in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. As of the end of 2013 and 2012, these insurance liabilities were $727 and $688 in the aggregate, respectively, and were included in accounts payable, accrued salaries and benefits, and other current liabilities on the consolidated balance sheets, classified based on their nature.
The Company’s wholly-owned captive insurance subsidiary (the captive) receives direct premiums, which are netted against the Company’s premium costs in selling, general and administrative expenses, in the consolidated statements of income. The captive participates in a reinsurance program that includes other third-party members. The reinsurance agreement is one year in duration, and new agreements are entered into by each participant at their discretion at the commencement of the next calendar year. The member agreements and practices of the reinsurance program limit any participating members’ individual risk. Income statement adjustments related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known. In the event the Company leaves the reinsurance program, the Company is not relieved of its primary obligation to the policyholders for activity prior to the termination of the annual agreement.
Other Current Liabilities
Other current liabilities consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Insurance-related liabilities
$
346

 
$
308

Deferred sales
204

 
159

Cash card liability
159

 
133

Other current liabilities
162

 
135

Sales return reserve
95

 
86

Tax-related liabilities
77

 
88

Vendor consideration liabilities
46

 
57

Other current liabilities
$
1,089

 
$
966


Derivatives
The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $458 and $284 at the end of 2013 and 2012, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts at the end of 2013 and 2012.
The unrealized gains or losses recognized in interest income and other, net in the accompanying consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2013, 2012, and 2011.
The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of electricity and natural gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and thus require no mark-to-market adjustment.
Foreign Currency
The functional currencies of the Company’s international subsidiaries are the local currency of the country in which the subsidiary is located. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Translation adjustments resulting from this process are recorded in accumulated other comprehensive income (loss). Revenues and expenses of the Company’s consolidated foreign operations are translated at average exchange rates prevailing during the year.
The Company recognizes foreign-currency transaction gains and losses related to revaluing all monetary assets and revaluing or settling monetary liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, this includes the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts.
Revenue Recognition
The Company generally recognizes sales, which include shipping fees where applicable, net of estimated returns, at the time the member takes possession of merchandise or receives services. When the Company collects payments from customers prior to the transfer of ownership of merchandise or the performance of services, the amounts received are generally recorded as deferred sales, included in other current liabilities on the consolidated balance sheets, until the sale or service is completed. The Company reserves for estimated sales returns based on historical trends in merchandise returns, net of the estimated net realizable value of merchandise inventories to be returned and any estimated disposition costs. Amounts collected from members, which under common trade practices are referred to as sales taxes, are recorded on a net basis.
The Company evaluates whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. Generally, when Costco is the primary obligor, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, can influence product or service specifications, or has several but not all of these indicators, revenue and related shipping fees are recorded on a gross basis. If the Company is not the primary obligor and does not possess other indicators of gross reporting as noted above, it records the net amounts as commissions earned, which is reflected in net sales.
The Company accounts for membership fee revenue, net of estimated refunds, on a deferred basis, whereby revenue is recognized ratably over the one-year membership period. The Company’s Executive Members qualify for a 2% reward (up to a maximum of $750 per year on qualified purchases), which can be redeemed at Costco warehouses. The Company accounts for this reward as a reduction in sales. The sales reduction and corresponding liability (classified as accrued member rewards on the consolidated balance sheets) are computed after giving effect to the estimated impact of non-redemptions based on historical data. The net reduction in sales was $970, $900, and $790 in 2013, 2012, and 2011, respectively.
Merchandise Costs
Merchandise costs consist of the purchase price of inventory sold, inbound and outbound shipping charges and all costs related to the Company’s depot operations, including freight from depots to selling warehouses, and are reduced by vendor consideration. Merchandise costs also include salaries, benefits, utilities, and depreciation on production equipment in fresh foods and certain ancillary departments.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, benefits and workers’ compensation costs for warehouse employees, other than fresh foods departments and certain ancillary businesses, as well as all regional and home office employees, including buying personnel. Selling, general and administrative expenses also include utilities, bank charges, rent and substantially all building and equipment depreciation, as well as other operating costs incurred to support warehouse operations.
Marketing and Promotional Expenses
Marketing and promotional costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of income.
Stock-Based Compensation
Compensation expense for all stock-based awards granted is recognized using the straight-line method. The fair value of restricted stock units (RSUs) is calculated as the market value of the common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.
 
While options and RSUs granted to employees generally vest over five years, all grants allow for quarterly vesting of the pro-rata number of stock-based awards that would vest on the next anniversary of the grant date in the event of retirement or voluntary termination. The Company does not reduce stock-based compensation for an estimate of forfeitures because the estimate is inconsequential in light of historical experience and considering the awards vest on a quarterly basis. The impact of actual forfeitures arising in the event of involuntary termination is recognized as actual forfeitures occur. Stock options have a ten-year term. Stock-based compensation expense is predominantly included in selling, general and administrative expenses on the consolidated statements of income. See Note 7 for additional information on the Company’s stock-based compensation plans.
Leases
The Company leases land and/or buildings at warehouses and certain other office and distribution facilities, primarily under operating leases. Operating leases expire at various dates through 2062, with the exception of one lease in the Company’s United Kingdom subsidiary, which expires in 2151. These leases generally contain one or more of the following options which the Company can exercise at the end of the initial lease term: (a) renewal of the lease for a defined number of years at the then-fair market rental rate or rate stipulated in the lease agreement; (b) purchase of the property at the then-fair market value; or (c) right of first refusal in the event of a third-party purchase offer.
The Company accounts for its lease expense with free rent periods and step-rent provisions on a straight-line basis over the original term of the lease and any exercised extension options, from the date the Company has control of the property. Certain leases provide for periodic rental increases based on price indices, and some of the leases provide for rents based on the greater of minimum guaranteed amounts or sales volume.
The Company has entered into capital leases for warehouse locations, expiring at various dates through 2040. Capital lease assets are included in buildings and improvements in the accompanying consolidated balance sheets. Amortization expense on capital lease assets is recorded as depreciation expense and is predominately included in selling, general and administrative expenses. Capital lease liabilities are recorded at the lesser of the estimated fair market value of the leased property or the net present value of the aggregate future minimum lease payments and are included in other current liabilities and deferred income taxes and other liabilities. Interest on these obligations is included in interest expense.
The Company’s asset retirement obligations (ARO) are primarily related to leasehold improvements that at the end of a lease must be removed in order to comply with the lease agreement. These obligations are recorded as a liability with an offsetting capital asset at the inception of the lease term based upon the estimated fair market value of the costs to remove the leasehold improvements. These liabilities are accreted over time to the projected future value of the obligation using the Company’s incremental borrowing rate. The capitalized ARO assets are depreciated using the same depreciation convention as the respective leasehold improvement assets and are included with buildings and improvements. Estimated ARO liabilities associated with these leases amounted to $50 and $44 at the end of 2013 and 2012, respectively, and are included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets.
Preopening Expenses
Preopening expenses related to new warehouses, new regional offices and other startup operations are expensed as incurred.
Interest Income and Other, Net
Interest income and other, net includes:
 
 
2013
 
2012
 
2011
Interest income
$
44

 
$
49

 
$
41

Foreign-currency transactions gains, net
39

 
40

 
9

Other, net
14

 
14

 
10

Interest income and other, net
$
97

 
$
103

 
$
60


Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the consolidated financial statements as appropriate. See Note 9 for additional information.
Net Income per Common Share Attributable to Costco
The computation of basic net income per share uses the weighted average number of shares that were outstanding during the period. The computation of diluted net income per share uses the weighted average number of shares in the basic net income per share calculation plus the number of common shares that would be issued assuming exercise and vesting to the participant of all potentially dilutive common shares outstanding using the treasury stock method for shares subject to stock options and restricted stock units and the “if converted” method for the convertible note securities.
Stock Repurchase Programs
Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted from additional paid-in capital and retained earnings. See Note 6 for additional information.
Recently Adopted Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (FASB) issued guidance that eliminated the option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity is required to present either a continuous statement of net income and other comprehensive income or to present the information in two separate but consecutive statements. The new guidance must be applied retrospectively and was effective for fiscal years and interim periods within those years beginning after December 15, 2011. The Company adopted this guidance at the beginning of its first quarter of 2013.
In September 2011, the FASB issued guidance to amend the rules related to testing goodwill for impairment. The revised guidance allows an initial qualitative evaluation, based on the entity’s events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform further impairment tests. The new guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this guidance at the beginning of its first quarter of 2013. Adoption of this guidance had no impact on the consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2013, the FASB issued guidance related to reclassifications out of accumulated other comprehensive income. An entity will be required to disclose the net income line items impacted by significant reclassifications out of accumulated other comprehensive income if the item is reclassified in its entirety. For other amounts that are not required to be reclassified in their entirety to net income cross-references to other disclosures required under U.S. GAAP are required to provide additional detail about those amounts. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2014. Adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.
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Investments
12 Months Ended
Sep. 01, 2013
Investments, Debt and Equity Securities [Abstract]
Investments
Note 2—Investments
The Company’s investments at the end of 2013 and 2012, were as follows:
 
2013:
Cost
Basis
 
Unrealized
Gains, Net
 
Recorded
Basis
Available-for-sale:
 
 
 
 
 
Government and agency securities(1)
$
1,263

 
$
0

 
$
1,263

Corporate notes and bonds
9

 
0

 
9

Asset and mortgage-backed securities
5

 
0

 
5

Total available-for-sale
1,277

 
0

 
1,277

Held-to-maturity:
 
 
 
 
 
Certificates of deposit
124

 
 
 
124

Bankers' acceptances
79

 
 
 
79

Total held-to-maturity
203

 
 
 
203

Total Short-Term Investments
$
1,480

 
$
0

 
$
1,480

_______________
(1)
Includes U.S. and Canadian government and agency securities.
 
2012:
Cost
Basis
 
Unrealized
Gains, Net
 
Recorded
Basis
Available-for-sale:
 
 
 
 
 
U.S. government and agency securities
$
776

 
$
6

 
$
782

Corporate notes and bonds
54

 
0

 
54

FDIC-insured corporate bonds
35

 
0

 
35

Asset and mortgage-backed securities
8

 
0

 
8

Total available-for-sale
873

 
6

 
879

Held-to-maturity:
 
 
 
 
 
Certificates of deposit
447

 
 
 
447

Total Short-Term Investments
$
1,320

 
$
6

 
$
1,326


Gross unrealized gains and losses on available-for-sale securities were not material in 2013. At the end of 2013, none of the Company's available-for-sale securities were in a continuous unrealized-loss position, nor were there any gross unrealized gains and losses on cash equivalents. At the end of 2012 and 2011, the Company’s available-for-sale securities that were in continuous unrealized-loss position and gross unrealized gains and losses on cash equivalents were not material.
The proceeds from sales of available-for-sale securities were $244, $482, and $602 during 2013, 2012, and 2011, respectively. Gross realized gains or losses from sales of available-for-sale securities were not material in 2013, 2012, and 2011.
The maturities of available-for-sale and held-to-maturity securities at the end of 2013, were as follows:
 
 
Available-For-Sale
 
Held-To-Maturity
 
Cost Basis
 
Fair Value
 
Due in one year or less
$
628

 
$
628

 
$
203

Due after one year through five years
632

 
632

 
0

Due after five years
17

 
17

 
0

 
$
1,277

 
$
1,277

 
$
203

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Fair Value Measurement
12 Months Ended
Sep. 01, 2013
Fair Value Disclosures [Abstract]
Fair Value Measurement
Note 3—Fair Value Measurement
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below present information at the end of 2013 and 2012, respectively, regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy reflecting the valuation techniques utilized to determine such fair value.
 
2013:
Level 1
 
Level 2
Money market mutual funds(1)
$
87

 
$
0

Investment in government and agency securities(2) 
0

 
1,263

Investment in corporate notes and bonds
0

 
9

Investment in asset and mortgage-backed securities
0

 
5

Forward foreign-exchange contracts, in asset position(3)
0

 
3

Forward foreign-exchange contracts, in (liability) position(3)
0

 
(3
)
Total
$
87

 
$
1,277

 
2012:
Level 1
 
Level 2
Money market mutual funds(1)
$
77

 
$
0

Investment in U.S. government and agency securities(2) 
0

 
794

Investment in corporate notes and bonds
0

 
54

Investment in FDIC-insured corporate bonds
0

 
35

Investment in asset and mortgage-backed securities
0

 
8

Forward foreign-exchange contracts, in asset position(3)
0

 
1

Forward foreign-exchange contracts, in (liability) position(3)
0

 
(3
)
Total
$
77

 
$
889

 _______________
(1)
Included in cash and cash equivalents in the accompanying consolidated balance sheets.
(2)
There were no securities included in cash and cash equivalents and $1,263 included in short-term investments in the accompanying consolidated balance sheets at the end of 2013. $12 and $782 included in cash and cash equivalents and short-term investments, respectively, in the accompanying consolidated balance sheets at the end of 2012.
(3)
The asset and the liability values are included in deferred income taxes and other current assets and other current liabilities, respectively, in the accompanying consolidated balance sheets. See Note 1 for additional information on derivative instruments.

At the end of 2013, the Company did not hold any Level 3 financial assets and liabilities that were measured at fair value on a recurring basis. At the end of 2012, the Company's holdings of Level 3 financial assets and liabilities were immaterial. There were no financial assets and liabilities measured on a recurring basis using significant unobservable inputs (Level 3) during 2013, and they were immaterial during 2012. There were no transfers in or out of Level 1, 2, or 3 during 2013 and 2012.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Financial assets measured at fair value on a nonrecurring basis include held-to-maturity investments that are carried at amortized cost and are not remeasured to fair value on a recurring basis. There were no fair value adjustments to these financial assets during 2013 and 2012. See Note 4 for discussion on the fair value of long-term debt.
Nonfinancial assets measured at fair value on a nonrecurring basis include items such as long-lived assets that are measured at fair value resulting from an impairment, if deemed necessary. Fair value adjustments to these nonfinancial assets and liabilities during 2013 and 2012 were immaterial.
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Debt
12 Months Ended
Sep. 01, 2013
Debt Disclosure [Abstract]
Debt
Short-Term Borrowings
The Company enters into various short-term bank credit facilities, totaling $700 and $438 in 2013 and 2012, respectively. At the end of 2013, $36 was outstanding under these credit facilities, with interest rates ranging from 0.10% to 4.31%, and is included within other current liabilities in the accompanying consolidated balance sheets.  There were no outstanding borrowings at the end of 2012.
The weighted average borrowings, maximum borrowings, and weighted average interest rate under all short-term borrowing arrangements, were as follows for 2013 and 2012:
 
Category of Aggregate
Short-term Borrowings
 
Maximum Amount
Outstanding
During the Fiscal Year
 
Average Amount
Outstanding
During the Fiscal Year
 
Weighted Average
Interest Rate
During the Fiscal Year
2013:
 
 
 
 
 
 
Bank borrowings:
 
 
 
 
 
 
Japan
 
$
157

 
$
56

 
0.56
%
Bank overdraft facility:
 
 
 
 
 
 
United Kingdom
 
14

 
4

 
1.50

2012:
 
 
 
 
 
 
Bank borrowings:
 
 
 
 
 
 
Japan
 
$
83

 
$
57

 
0.58
%
Bank overdraft facility:
 
 
 
 
 
 
United Kingdom
 
3

 
0

 
1.50


 
Long-Term Debt
In July 2013, the Company’s Japanese subsidiary entered into an approximately $102 three-year term loan (with a possible two year extension), bearing interest at 0.67%. Interest is payable semi-annually and principal is due on June 30, 2016. This debt is included in other long-term debt in the table below and is classified as a Level 2 measurement in the fair value hierarchy.
In May 2013, the Company's Japanese subsidiary issued approximately $102 of 1.05% promissory notes through a private placement. Interest is payable semi-annually, and principal is due in May 2023. These notes are included in other long-term debt in the table below and are classified as a Level 3 measurement in the fair value hierarchy.
In December 2012, the Company issued $3,500 in aggregate principle amount of Senior Notes (December 2012 Notes collectively) as follows: $1,200 of 0.65% Senior Notes due December 7, 2015 (0.65% Notes); $1,100 of 1.125% Senior Notes due December 15, 2017 (1.125% Notes); and $1,200 of 1.7% Senior Notes due December 15, 2019 (1.7% Notes). Interest is payable on the 0.65% Notes semi-annually on June 7 and December 7 of each year until its maturity date. On the 1.125% and 1.7% Notes, interest is due semi-annually on June 15 and December 15 of each year until its maturity date. The Company, at its option, may redeem the December 2012 Notes at any time, in whole or in part, at a redemption price plus accrued interest. The redemption price is equal to the greater of 100% of the principal amount of the December 2012 Notes to be redeemed or the sum of the present value of the remaining scheduled payments of principal and interest to maturity. Additionally, the Company will be required to make an offer to purchase the December 2012 Notes at a price of 101% of the principal amount plus accrued and unpaid interest to the date of repurchase, upon certain events as defined by the terms of the December 2012 Notes. The discount and issuance costs associated with the December 2012 Notes are being amortized to interest expense over the terms of the notes. The December 2012 Notes are classified as a Level 2 measurement in the fair value hierarchy.
In October and December 2011, the Company’s Japanese subsidiary issued two series of 1.18% Yen-denominated promissory notes through a private placement. For both series, interest is payable semi-annually, and principal is due in October 2018. These notes are included in other long-term debt in the table below and are classified as a Level 3 measurement in the fair value hierarchy.
In June 2008, the Company’s Japanese subsidiary entered into a ten-year term loan with a variable rate of interest of Yen TIBOR (6-month) plus a 0.35% margin (0.68% and 0.78% at the end of 2013 and 2012, respectively) on the outstanding balance. Interest is payable semi-annually and principal is due in June 2018. This debt is included in other long-term debt in the table below and is classified as a Level 3 measurement in the fair value hierarchy. 
In October 2007, the Company’s Japanese subsidiary issued promissory notes through a private placement, bearing interest at 2.695%. Interest is payable semi-annually, and principal is due in October 2017. These notes are included in other long-term debt in the table below and are classified as a Level 3 measurement in the fair value hierarchy.
In February 2007, the Company issued $1,100 of 5.5% Senior Notes due March 15, 2017 at a discount of $6 (the 2007 Senior Note). Interest is payable semi-annually on March 15 and September 15 of each year until its maturity date. The discount and issuance costs associated with the Senior Note is being amortized to interest expense over the term of the note. The Company, at its option, may redeem the 2007 Senior Note at any time, in whole or in part, at a redemption price plus accrued interest. The redemption price is equal to the greater of 100% of the principal amount of the 2007 Senior Note to be redeemed or the sum of the present value of the remaining scheduled payments of principal and interest to maturity. Additionally, the Company will be required to make an offer to purchase the 2007 Senior Note at a price of 101% of the principal amount plus accrued and unpaid interest to the date of repurchase, upon certain events as defined by the terms of the 2007 Senior Note. This note is classified as a Level 2 measurement in the fair value hierarchy.
In August 1997, the Company sold $900 principal amount at maturity 3.5% Zero Coupon Convertible Subordinated Notes (Zero Coupon Notes) due in August 2017. The Zero Coupon Notes were priced with a yield to maturity of 3.5%, resulting in gross proceeds to the Company of $450. The remaining Zero Coupon Notes outstanding are convertible into a maximum of 30,000 shares of Costco Common Stock shares at an initial conversion price of $22.71. The Company, at its option, may redeem the Zero Coupon Notes (at the discounted issue price plus accrued interest to date of redemption). At the end of 2013, $899 in principal amount of Zero Coupon Notes had been converted by note holders into shares of Costco Common Stock. These notes are included in other long-term debt in the table below and are classified as a Level 2 measurement in the fair value hierarchy.
The carrying value and estimated fair value of the Company’s long-term debt at the end of 2013 and 2012 consisted of the following:
 
 
2013
 
2012
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
5.5% Senior Notes due March 2017
$
1,098

 
$
1,248

 
$
1,097

 
$
1,325

0.65% Senior Notes due December 2015
1,199

 
1,200

 
0

 
0

1.125% Senior Notes due December 2017
1,100

 
1,065

 
0

 
0

1.7% Senior Notes due December 2019
1,198

 
1,157

 
0

 
0

Other long-term debt
403

 
412

 
285

 
338

Total long-term debt
4,998

 
5,082

 
1,382

 
1,663

Less current portion
0

 
0

 
1

 
1

Long-term debt, excluding current portion
$
4,998

 
$
5,082

 
$
1,381

 
$
1,662


The estimated fair value of the Company’s debt was based primarily on reported market values, recently completed market transactions, and estimates based upon interest rates, maturities, and credit. Substantially all of the Company's long-term debt is classified as Level 2.
Maturities of long-term debt during the next five fiscal years and thereafter are as follows:
 
2014
$
0

2015
0

2016
1,301

2017
1,099

2018
1,196

Thereafter
1,402

Total
$
4,998

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Leases
12 Months Ended
Sep. 01, 2013
Leases [Abstract]
Leases
Note 5—Leases
Operating Leases
The aggregate rental expense for 2013, 2012 and 2011 was $225, $220, and $208, respectively. Sub-lease income, included in interest income and other, net, and contingent rents are not material.
Capital Leases
Gross assets recorded under capital leases were $201 and $187, at the end of 2013 and 2012, respectively. These assets are recorded net of accumulated amortization of $28 and $19 at the end of 2013 and 2012, respectively.
At the end of 2013, future minimum payments, net of sub-lease income of $150 for all years combined, under non-cancelable operating leases with terms of at least one year and capital leases were as follows:
 
 
Operating
Leases
 
Capital
Leases
2014
$
189

 
$
17

2015
175

 
17

2016
167

 
16

2017
160

 
16

2018
153

 
16

Thereafter
1,753

 
338

Total
$
2,597

 
420

Less amount representing interest
 
 
(224
)
Net present value of minimum lease payments
 
 
196

Less current installments(1)
 
 
(4
)
Long-term capital lease obligations less current installments(2)
 
 
$
192

_______________
(1)
Included in other current liabilities.
(2)
Included in deferred income taxes and other liabilities.
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Stockholders' Equity
12 Months Ended
Sep. 01, 2013
Stockholders' Equity Note [Abstract]
Stockholders' Equity
Note 6—Stockholders’ Equity
Dividends
The Company’s current quarterly dividend rate is $0.31 per share. In December 2012, the Company paid a special cash dividend of $7.00 per share, totaling approximately $3,049.
Stock Repurchase Programs
The Company’s stock repurchase program is conducted under a $4,000 authorization by the Board of Directors approved in April 2011, which expires in April 2015. As of the end of 2013, the total amount repurchased under this plan was $945. The following table summarizes the Company’s stock repurchase activity:
 
Shares
Repurchased
(000’s)
 
Average
Price per
Share
 
Total Cost
2013
357

 
$
96.41

 
$
34

2012
7,272

 
84.75

 
617

2011
8,939

 
71.74

 
641


These amounts differ from the stock repurchase balances in the accompanying consolidated statements of cash flows due to changes in unsettled stock repurchases at the end of each fiscal year.
Accumulated Other Comprehensive (Loss) Income
Accumulated other comprehensive (loss) income, net of tax where applicable, was $(122) and $156 at the end of 2013 and 2012, respectively, and was comprised primarily of unrealized foreign-currency translation adjustments. In 2012, as part of the acquisition of the noncontrolling interest in Mexico, the Company reclassified $155 of accumulated unrealized losses on foreign-currency translation adjustments to Costco’s accumulated other comprehensive income. This balance was previously included as a component of non-controlling interest.
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Stock-Based Compensation Plans
12 Months Ended
Sep. 01, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation Plans
Note 7—Stock-Based Compensation Plans
The Company grants stock-based compensation to employees and non-employee directors. Stock option awards were granted under the Amended and Restated 2002 Stock Incentive Plan, amended as of January 2006 (Second Restated 2002 Plan), and predecessor plans until, effective in the fourth quarter of fiscal 2006, the Company began awarding restricted stock units (RSUs) under the Second Restated 2002 Plan in lieu of stock options. Through a series of shareholder approvals, there have been amended and restated plans and new provisions implemented by the Company. Under revisions in the Fourth Restated 2002 Plan in the fourth quarter of fiscal 2008, grants of RSUs are subject, upon certain terminations of employment, to quarterly vesting. Employees who attain certain years of service with the Company receive shares under accelerated vesting provisions on the annual vesting date rather than upon qualified retirement. The first grant impacted by these amendments occurred in the first quarter of fiscal 2009. Each share issued in respect of stock bonus or stock unit awards is counted as 1.75 shares toward the limit of shares made available under the Fourth Restated 2002 Plan. The Sixth Restated 2002 Plan (Sixth Plan), amended in the second quarter of fiscal 2012, is the Company’s only stock-based compensation plan with shares available for grant at the end of 2013. The Sixth Plan authorizes the issuance of 16,000,000 shares (9,143,000 RSUs) of common stock for future grants in addition to shares previously authorized. The Company issues new shares of common stock upon exercise of stock options and upon vesting of RSUs. Vested RSUs are generally delivered to participants annually, net of minimum statutory withholding taxes.
As required by the Company’s Sixth Plan, in conjunction with the special cash dividend discussed in Note 6, adjustments were made to awards outstanding on the dividend record date to preserve their value following the dividend, as follows: (i) the number of shares subject to outstanding RSUs was increased; and (ii) the exercise prices of outstanding stock options were reduced and the number of shares subject to such options was increased. The number of outstanding stock options and RSUs was increased by multiplying the number of outstanding shares by a factor of 1.0763, representing the ratio of the NASDAQ closing price of $105.95 on December 5, 2012, which was the last trading day immediately prior to the ex-dividend date, to the NASDAQ opening price of $98.44 on the ex-dividend date, December 6, 2012. The exercise prices of stock options were reduced by multiplying the prices by a factor of 0.9291, representing the ratio of the NASDAQ opening price on the ex-dividend date to the NASDAQ closing price on December 5. Approximately 2,905,000 stock options were adjusted, and approximately 9,676,000 RSUs were adjusted. These adjustments did not result in additional stock-based compensation expense, as the fair value of the outstanding awards did not change. As further required by the Sixth Plan, the maximum number of shares issuable under the Sixth Plan was also proportionally adjusted, which resulted in an additional 1,362,000 shares (778,000 RSUs) available to be granted.
Summary of Stock Option Activity
All outstanding stock options were fully vested and exercisable at the end of 2013 and 2012. The following table summarizes stock option transactions during 2013:
 
Number Of
Options
(in 000’s)
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value(1)
Outstanding at the end of 2012
3,161

 
$
40.90

 
 
 
 
Exercised
(1,435
)
 
36.22

 
 
 
 
Special cash dividend
221

 
N/A

 
 
 
 
Outstanding at the end of 2013
1,947

 
$
39.70

 
1.38
 
$
140

 _______________
(1)
The difference between the exercise price and market value of common stock at the end of 2013. 
The following is a summary of stock options outstanding at the end of 2013:
 
Options Outstanding and Exercisable
Range of Prices(1)
Number of
Options
(in  000’s)
 
Weighted-
Average
Remaining
Contractual
Life
 
Weighted-
Average
Exercise
Price
$34.71–$40.69
1,775

 
1.36
 
$
39.39

$42.73–$43.17
172

 
1.59
 
42.93

 
1,947

 
1.38
 
$
39.70


 _______________
(1) Prices include the effect of the special cash dividend noted above.
The tax benefits realized, derived from the compensation deductions resulting from the option exercises, and intrinsic value related to total stock options exercised during 2013, 2012, and 2011 are provided in the following table:
 
2013
 
2012
 
2011
Actual tax benefit realized for stock options exercised
$
33

 
$
50

 
$
78

Intrinsic value of stock options exercised(1)
$
94

 
$
137

 
$
227

_______________
(1) The difference between the exercise price and market value of common stock measured at each individual exercise date.
Summary of Restricted Stock Unit Activity
RSUs granted to employees and to non-employee directors generally vest over five years and three years, respectively; however, the Company provides for accelerated vesting for employees and non-employee directors who have attained 25 or more years and five or more years of service with the Company, respectively. Recipients are not entitled to vote or receive dividends on non-vested and undelivered shares. At the end of 2013, 11,174,000 shares were available to be granted as RSUs under the Sixth Restated 2002 Plan.
The following awards were outstanding at the end of 2013:
9,355,000 time-based RSUs that vest upon continued employment over specified periods of time;
726,000 performance-based RSUs, of which 350,000 were granted to certain executive officers subject to the certification of the attainment of specified performance targets for 2013, which occurred in September 2013. These RSUs vest upon continued employment over specified periods of time.

The following table summarizes RSU transactions during 2013:
 
Number of
Units
(in 000’s)
 
Weighted-Average
Grant Date Fair
Value
Outstanding at the end of 2012
9,260

 
$
66.14

Granted
4,192

 
90.99

Vested and delivered
(3,872
)
 
67.17

Forfeited
(231
)
 
71.19

Special cash dividend
732

 
N/A

Outstanding at the end of 2013
10,081

 
$
72.52


The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2013 was $504 and the weighted-average period of time over which this cost will be recognized is 1.7 years. Included in the outstanding balance at the end of 2013 were approximately 3,100,000 RSUs vested but not yet delivered.
Summary of Stock-Based Compensation
The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:
 
2013
 
2012
 
2011
Stock-based compensation expense before income taxes
$
285

 
$
241

 
$
207

Less recognized income tax benefit
(94
)
 
(79
)
 
(67
)
Stock-based compensation expense, net of income taxes
$
191

 
$
162

 
$
140

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Retirement Plans
12 Months Ended
Sep. 01, 2013
Compensation and Retirement Disclosure [Abstract]
Retirement Plans
Note 8—Retirement Plans
The Company has a 401(k) Retirement Plan available to all U.S. employees who have completed 90 days of employment. For all U.S. employees, with the exception of California union employees, the plan allows pre-tax deferrals, which the Company matches (50% of the first one thousand dollars of employee contributions). In addition, the Company provides each eligible participant an annual discretionary contribution based on salary and years of service.
California union employees are allowed to make pre-tax deferrals into the 401(k) plan, which the Company matches (50% of the first five hundred dollars of employee contributions) and provides each eligible participant a contribution based on hours worked and years of service.
California union employees participate in a defined benefit plan sponsored by their union under a multi-employer plan, and the Company makes contributions to this plan based upon its union agreement. The Company’s contributions to this plan are not material to the Company’s consolidated financial statements.
The Company has a defined contribution plan for Canadian employees and contributes a percentage of each employee’s salary. Certain Other International operations have defined benefit and defined contribution plans that are not significant. Amounts expensed under all plans were $409, $382, and $345 for 2013, 2012, and 2011, respectively, and were included in selling, general and administrative expenses and merchandise costs in the accompanying consolidated statements of income.
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Income Taxes
12 Months Ended
Sep. 01, 2013
Income Tax Disclosure [Abstract]
Income Taxes
Note 9—Income Taxes
Income before income taxes is comprised of the following:
 
 
2013
 
2012
 
2011
Domestic (including Puerto Rico)
$
2,070

 
$
1,809

 
$
1,526

Foreign
981

 
958

 
857

Total
$
3,051

 
$
2,767

 
$
2,383


The provisions for income taxes for 2013, 2012, and 2011 are as follows:
 
 
2013
 
2012
 
2011
Federal:
 
 
 
 
 
Current
$
572

 
$
591

 
$
409

Deferred
16

 
12

 
74

Total federal
588

 
603

 
483

State:
 
 
 
 
 
Current
109

 
100

 
78

Deferred
4

 
2

 
14

Total state
113

 
102

 
92

Foreign:
 
 
 
 
 
Current
302

 
312

 
270

Deferred
(13
)
 
(17
)
 
(4
)
Total foreign
289

 
295

 
266

Total provision for income taxes
$
990

 
$
1,000

 
$
841


Tax benefits associated with the exercise of employee stock options and other employee stock programs were allocated to equity attributable to Costco in the amount of $59, $65, and $59, in 2013, 2012, and 2011, respectively.
The reconciliation between the statutory tax rate and the effective rate for 2013, 2012, and 2011 is as follows:
 
 
2013
 
2012
 
2011
Federal taxes at statutory rate
$
1,068

 
35.0
 %
 
$
969

 
35.0
 %
 
$
834

 
35.0
 %
State taxes, net
66

 
2.1

 
59

 
2.1

 
55

 
2.4

Foreign taxes, net
(87
)
 
(2.8
)
 
(61
)
 
(2.2
)
 
(66
)
 
(2.8
)
Employee stock ownership plan (ESOP)
(65
)
 
(2.1
)
 
(7
)
 
(0.3
)
 
(6
)
 
(0.3
)
Other
8

 
0.2

 
40

 
1.5

 
24

 
1.0

Total
$
990

 
32.4
 %
 
$
1,000

 
36.1
 %
 
$
841

 
35.3
 %

 
The Company’s provision for income taxes for 2013 was favorably impacted by a $62 nonrecurring tax benefit in connection with the special cash dividend of $7.00 per share paid by the Company to employees, who through the Company's 401(k) Retirement Plan owned 22,600,000 shares of Company stock through an ESOP. Dividends paid on these shares are deductible for U.S. income tax purposes.
The Company’s provision for income taxes for 2012 was adversely impacted by nonrecurring net tax expense of $25 relating primarily to the following items: the adverse impact of an audit of Costco Mexico by the Mexican tax authority; the tax effects of the cash dividend declared by Costco Mexico (included in Other in the table above); and the tax effects of nondeductible expenses for the Company’s contribution to an initiative reforming alcohol beverage laws in Washington State.
The components of the deferred tax assets (liabilities) are as follows:
 
2013
 
2012
Equity compensation
$
80

 
$
79

Deferred income/membership fees
130

 
148

Accrued liabilities and reserves
530

 
461

Other
42

 
55

Property and equipment
(558
)
 
(522
)
Merchandise inventories
(190
)
 
(182
)
Net deferred tax assets
$
34

 
$
39


The deferred tax accounts at the end of 2013 and 2012 include current deferred income tax assets of $422 and $393 respectively, included in deferred income taxes and other current assets; non-current deferred income tax assets of $62 and $58, respectively, included in other assets; and non-current deferred income tax liabilities of $450 and $412, respectively, included in deferred income taxes and other liabilities.
The Company has not provided for U.S. deferred taxes on cumulative undistributed earnings of $3,619 and $3,162 at the end of 2013 and 2012, respectively, of certain non-U.S. consolidated subsidiaries as such earnings are deemed by the Company to be indefinitely reinvested. Because of the availability of U.S. foreign tax credits and complexity of the computation, it is not practicable to determine the U.S. federal income tax liability that would be associated with such earnings if such earnings were not deemed to be indefinitely reinvested. The Company believes that its U.S. current and projected asset position is sufficient to meet its U.S. liquidity requirements and has no current plans to repatriate for use in the U.S. the cash and cash equivalents and short-term investments held by these subsidiaries.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2013 and 2012 is as follows:
 
2013
 
2012
Gross unrecognized tax benefit at beginning of year
$
116

 
$
106

Gross increases—current year tax positions
10

 
15

Gross increases—tax positions in prior years
5

 
3

Gross decreases—tax positions in prior years
(13
)
 
(3
)
Settlements
(38
)
 
(3
)
Lapse of statute of limitations
0

 
(2
)
Gross unrecognized tax benefit at end of year
$
80

 
$
116



Included in the balance at the end of 2013, are $36 of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
The total amount of such unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods is $46 and $36 at the end of 2013 and 2012, respectively.
Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Interest and penalties recognized by the Company were not material in 2013 and 2012. Accrued interest and penalties were $11 and $16 at the end of 2013 and 2012, respectively.
The Company is currently under audit by several taxing jurisdictions in the United States and in several foreign countries. Some audits may conclude in the next 12 months and the unrecognized tax benefits we have recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next twelve months.
The Company files income tax returns in the United States, various state and local jurisdictions, in Canada and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2007. The Company is currently subject to examination in Canada for fiscal years 2009 to present and in California for fiscal years 2004 to present. No other examinations are believed to be material.
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Net Income per Common and Common Equivalent Share
12 Months Ended
Sep. 01, 2013
Earnings Per Share [Abstract]
Net Income Per Common and Common Equivalent Share
Note 10—Net Income per Common and Common Equivalent Share
The following table shows the amounts used in computing net income per share and the effect on net income and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):
 
 
2013
 
2012
 
2011
Net income available to common stockholders after assumed conversions of dilutive securities
$
2,039

 
$
1,710

 
$
1,463

Weighted average number of common shares used in basic net income per common share
435,741

 
433,620

 
436,119

RSUs and stock options
4,552

 
4,906

 
6,063

Conversion of convertible notes
219

 
847

 
912

Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share
440,512

 
439,373

 
443,094

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Commitments and Contingencies
12 Months Ended
Sep. 01, 2013
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies
Commitments and Contingencies
Legal Proceedings
The Company is involved in a number of claims, proceedings and litigation arising from its business and property ownership. In accordance with applicable accounting guidance, the Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. As of the date of this report, the Company has not recorded an accrual with respect to any matter described below. In each case, there is a reasonable possibility that a loss may be incurred, including a loss in excess of the applicable accrual. For matters where no accrual has been recorded, the possible loss or range of loss (including any loss in excess of our accrual) cannot in our view be reasonably estimated because, among other things, (i) the remedies or penalties sought are indeterminate or unspecified, (ii) the legal and/or factual theories are not well developed; and/or (iii) the matters involve complex or novel legal theories or a large number of parties.
The Company is a defendant in the following matters, among others:
A case brought as a class action on behalf of certain present and former female managers, in which plaintiffs allege denial of promotion based on gender in violation of Title VII of the Civil Rights Act of 1964 and California state law. Shirley “Rae” Ellis v. Costco Wholesale Corp., United States District Court (San Francisco), Case No. C-04-3341-MHP. Plaintiffs seek compensatory damages, punitive damages, injunctive relief, interest and attorneys’ fees. Class certification was granted by the district court on January 11, 2007. On September 16, 2011, the United States Court of Appeals for the Ninth Circuit reversed the order of class certification and remanded to the district court for further proceedings. On September 25, 2012, the district court certified a class of women in the United States denied promotion to warehouse general manager or assistant general manager since January 3, 2002. Currently the class is believed to be approximately 1,150 people. A trial has been set for March 2014. In October 2013 the parties reached an agreement in principle on a settlement, which is subject to the execution of definitive documentation and court approval. Any payments to class members would be contingent upon proof of liability in individual hearings.  Payments under the settlement would be immaterial to the Company’s operations or financial position.
Numerous putative class actions have been brought around the United States against motor fuel retailers, including the Company, alleging that they have been overcharging consumers by selling gasoline or diesel that is warmer than 60 degrees without adjusting the volume sold to compensate for heat-related expansion or disclosing the effect of such expansion on the energy equivalent received by the consumer. The Company is named in the following actions: Raphael Sagalyn, et al., v. Chevron USA, Inc., et al., Case No. 07-430 (D. Md.); Phyllis Lerner, et al., v. Costco Wholesale Corporation, et al., Case No. 07-1216 (C.D. Cal.); Linda A. Williams, et al., v. BP Corporation North America, Inc., et al., Case No. 07-179 (M.D. Ala.); James Graham, et al. v. Chevron USA, Inc., et al., Civil Action No. 07-193 (E.D. Va.); Betty A. Delgado, et al., v. Allsups, Convenience Stores, Inc., et al., Case No. 07-202 (D.N.M.); Gary Kohut, et al. v. Chevron USA, Inc., et al., Case No. 07-285 (D. Nev.); Mark Rushing, et al., v. Alon USA, Inc., et al., Case No. 06-7621 (N.D. Cal.); James Vanderbilt, et al., v. BP Corporation North America, Inc., et al., Case No. 06-1052 (W.D. Mo.); Zachary Wilson, et al., v. Ampride, Inc., et al., Case No. 06-2582 (D. Kan.); Diane Foster, et al., v. BP North America Petroleum, Inc., et al., Case No. 07-02059 (W.D. Tenn.); Mara Redstone, et al., v. Chevron USA, Inc., et al., Case No. 07-20751 (S.D. Fla.); Fred Aguirre, et al. v. BP West Coast Products LLC, et al., Case No. 07-1534 (N.D. Cal.); J.C. Wash, et al., v. Chevron USA, Inc., et al.; Case No. 4:07cv37 (E.D. Mo.); Jonathan Charles Conlin, et al., v. Chevron USA, Inc., et al.; Case No. 07 0317 (M.D. Tenn.); William Barker, et al. v. Chevron USA, Inc., et al.; Case No. 07-cv-00293 (D.N.M.); Melissa J. Couch, et al. v. BP Products North America, Inc., et al., Case No. 07cv291 (E.D. Tex.); S. Garrett Cook, Jr., et al., v. Hess Corporation, et al., Case No. 07cv750 (M.D. Ala.); Jeff Jenkins, et al. v. Amoco Oil Company, et al., Case No. 07-cv-00661 (D. Utah); and Mark Wyatt, et al., v. B. P. America Corp., et al., Case No. 07-1754 (S.D. Cal.). On June 18, 2007, the Judicial Panel on Multidistrict Litigation assigned the action, entitled In re Motor Fuel Temperature Sales Practices Litigation, MDL Docket No 1840, to Judge Kathryn Vratil in the United States District Court for the District of Kansas. On April 12, 2009, the Company agreed to settle the actions in which it is named as a defendant. Under the settlement, which is subject to final approval by the court, the Company agreed, to the extent allowed by law, to install over five years from the effective date of the settlement temperature-correcting dispensers in the States of Alabama, Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Utah, and Virginia. Other than payments to class representatives, the settlement does not provide for cash payments to class members. On September 22, 2011, the court preliminarily approved a revised settlement, which did not materially alter the terms. On April 24, 2012, the court granted final approval of the revised settlement. A class member who objected has filed a notice of appeal from the order approving the settlement. Plaintiffs have moved for an award of $10 million in attorneys’ fees, as well as an award of costs and payments to class representatives. The Company has opposed the motion.
On October 4, 2006, the Company received a grand jury subpoena from the United States Attorney’s Office for the Central District of California, seeking records relating to the Company’s receipt and handling of hazardous merchandise returned by Costco members and other records. The Company has entered into a tolling agreement with the United States Attorney’s Office.
The Environmental Protection Agency (EPA) issued an Information Request to the Company, dated November 1, 2007, regarding warehouses in the states of Arizona, California, Hawaii, and Nevada and relating to compliance with regulations concerning air-conditioning and refrigeration equipment. On March 4, 2009, the Company was advised by the Department of Justice that the Department was prepared to allege that the Company has committed at least nineteen violations of the leak-repair requirements of 40 C.F.R. § 82.156(i) and at least seventy-four violations of the recordkeeping requirements of 40 C.F.R. § 82.166(k), (m) at warehouses in these states. The Company has responded to these allegations, is engaged in communications with the Department about these and additional allegations, and has entered into tolling agreements. Substantial penalties may be levied for violations of the Clean Air Act. The Company is cooperating with this inquiry.
On October 7, 2009, the District Attorneys for San Diego, San Joaquin and Solano Counties filed a complaint, People of the State of California v. Costco Wholesale Corp., et al, No. 37-2009-00099912 (Superior Court for the County of San Diego), alleging on information and belief that the Company has violated and continues to violate provisions of the California Health and Safety Code and the Business and Professions Code through the use of certain spill clean-up materials at its gasoline stations. In July 2013, the matter was settled with, among other things, payment of an immaterial sum to the County of San Diego as partial reimbursement for costs incurred in the matter.
The Company has received notices from most states stating that they have appointed an agent to conduct an examination of the books and records of the Company to determine whether it has complied with state unclaimed property laws. In addition to seeking the turnover of unclaimed property subject to escheat laws, the states may seek interest, penalties, costs of examinations, and other relief. The State of Washington conducted such an examination on its own behalf and on February 4, 2011 issued an assessment. The Company filed suit to contest the assessment. In November 2012 the matter was settled for an amount that was immaterial and less than the amount of the assessment.
The Company has received from the Drug Enforcement Administration subpoenas and administrative inspection warrants concerning the Company's fulfillment of prescriptions related to controlled substances and related practices. The Company is seeking to cooperate with these processes.
The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position; however, it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual fiscal quarter.
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Segment Reporting
12 Months Ended
Sep. 01, 2013
Segment Reporting [Abstract]
Segment Reporting
The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, the United Kingdom, Japan, and Australia and through majority-owned subsidiaries in Taiwan and Korea. The Company’s reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are the same as described in Note 1. All material inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.
 
 
United States
Operations
 
Canadian
Operations
 
Other
International
Operations
 
Total
2013
 
 
 
 
 
 
 
Total revenue
$
75,493

 
$
17,179

 
$
12,484

 
$
105,156

Operating income
1,810

 
756

 
487

 
3,053

Depreciation and amortization
696

 
123

 
127

 
946

Additions to property and equipment
1,090

 
186

 
807

 
2,083

Net property and equipment
9,652

 
1,621

 
2,608

 
13,881

Total assets
20,608

 
4,529

 
5,146

 
30,283

2012

 

 

 

Total revenue
$
71,776

 
$
15,717

 
$
11,644

 
$
99,137

Operating income
1,632

 
668

 
459

 
2,759

Depreciation and amortization
667

 
117

 
124

 
908

Additions to property and equipment
1,012

 
170

 
298

 
1,480

Net property and equipment
9,236

 
1,664

 
2,061

 
12,961

Total assets
18,401

 
4,237

 
4,502

 
27,140

2011

 

 

 

Total revenue
$
64,904

 
$
14,020

 
$
9,991

 
$
88,915

Operating income
1,395

 
621

 
423

 
2,439

Depreciation and amortization
640

 
117

 
98

 
855

Additions to property and equipment
876

 
144

 
270

 
1,290

Net property and equipment
8,870

 
1,608

 
1,954

 
12,432

Total assets
18,558

 
3,741

 
4,462

 
26,761

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Quarterly Financial Data (Unaudited)
12 Months Ended
Sep. 01, 2013
Quarterly Financial Information Disclosure [Abstract]
Quarterly Financial Data (Unaudited)
The two tables that follow reflect the unaudited quarterly results of operations for 2013 and 2012.
 
52 Weeks Ended September 1, 2013
 
First
Quarter
(12 Weeks)
 
Second
Quarter
(12 Weeks)
 
Third
Quarter
(12 Weeks)
 
Fourth
Quarter
(16 Weeks)
 
Total
(52 Weeks)
REVENUE
 
 
 
 
 
 
 
 
 
Net sales
$
23,204

 
$
24,343

 
$
23,552

 
$
31,771

 
$
102,870

Membership fees
511

 
528

 
531

 
716

 
2,286

Total revenue
23,715

 
24,871

 
24,083

 
32,487

 
105,156

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Merchandise costs
20,726

 
21,766

 
21,038

 
28,418

 
91,948

Selling, general and administrative
2,332

 
2,361

 
2,313

 
3,098

 
10,104

Preopening expenses
18

 
6

 
10

 
17

 
51

Operating income
639

 
738

 
722

 
954

 
3,053

OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense
(13
)
 
(25
)
 
(25
)
 
(36
)
 
(99
)
Interest income and other, net
20

 
26

 
15

 
36

 
97

INCOME BEFORE INCOME TAXES
646

 
739

 
712

 
954

 
3,051

Provision for income taxes
225

 
185

(1) 
248

 
332

 
990

Net income including noncontrolling interests
421

 
554

 
464

 
622

 
2,061

Net income attributable to noncontrolling interests
(5
)
 
(7
)
 
(5
)
 
(5
)
 
(22
)
NET INCOME ATTRIBUTABLE TO COSTCO
$
416

 
$
547

 
$
459

 
$
617

 
$
2,039

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
 
 
 
 
 
 
 
 
 
Basic
$
0.96

 
$
1.26

 
$
1.05

 
$
1.41

 
$
4.68

Diluted
$
0.95

 
$
1.24

 
$
1.04

 
$
1.40

 
$
4.63

Shares used in calculation (000’s)
 
 
 
 
 
 
 
 
 
Basic
433,423

 
435,975

 
436,488

 
436,752

 
435,741

Diluted
438,643

 
439,812

 
440,780

 
441,907

 
440,512

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.275

 
$
7.275

(2) 
$
0.31

 
$
0.31

 
$
8.17

_______________
(1)
Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
(2)
Includes the special cash dividend of $7.00 per share paid in December 2012.
Note 13—Quarterly Financial Data (Unaudited) (Continued)
 
53 Weeks Ended September 2, 2012
 
First
Quarter
(12 Weeks)
 
Second
Quarter
(12 Weeks)
 
Third
Quarter
(12 Weeks)
 
Fourth
Quarter
(17 Weeks)
 
Total
(53 Weeks)
REVENUE
 
 
 
 
 
 
 
 
 
Net sales
$
21,181

 
$
22,508

 
$
21,849

 
$
31,524

 
$
97,062

Membership fees
447

 
459

 
475

 
694

 
2,075

Total revenue
21,628

 
22,967

 
22,324

 
32,218

 
99,137

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Merchandise costs
18,931

 
20,139


19,543

 
28,210

 
86,823

Selling, general and administrative
2,144

(1) 
2,178

 
2,152

 
3,044

 
9,518

Preopening expenses
10

 
6

 
6

 
15

 
37

Operating income
543

 
644

 
623

 
949

 
2,759

OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense
(27
)
 
(27
)
 
(19
)
 
(22
)
 
(95
)
Interest income and other, net
37

 
10

 
18

 
38

 
103

INCOME BEFORE INCOME TAXES
553

 
627

 
622

 
965

 
2,767

Provision for income taxes
225

(2) 
215

 
217

 
343

 
1,000

Net income including noncontrolling interests
328

 
412

 
405

 
622

 
1,767

Net income attributable to noncontrolling interests
(8
)
 
(18
)
 
(19
)
 
(13
)
 
(58
)
NET INCOME ATTRIBUTABLE TO COSTCO
$
320

 
$
394

 
$
386

 
$
609

 
$
1,709

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
 
 
 
 
 
 
 
 
 
Basic
$
0.74

 
$
0.91

 
$
0.89

 
$
1.41

 
$
3.94

Diluted
$
0.73

 
$
0.90

 
$
0.88

 
$
1.39

 
$
3.89

Shares used in calculation (000’s)
 
 
 
 
 
 
 
 
 
Basic
434,222

 
434,535

 
433,791

 
432,437

 
433,620

Diluted
440,615

 
439,468

 
439,166

 
438,344

 
439,373

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.24

 
$
0.24

 
$
0.00

(3) 
$
0.55

(4 
) 
$
1.03

_______________
(1)
Includes a $17 charge to selling, general and administrative for contributions to an initiative reforming alcohol beverage laws in Washington State.
(2)
Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
(3)
On May 9, 2012, subsequent to the end of the third quarter of 2012, the Board of Directors declared a quarterly cash dividend of $0.275 per share.
(4)
The quarterly dividend rate was $0.275 per share.
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Summary of Significant Accounting Policies (Policies)
12 Months Ended
Sep. 01, 2013
Accounting Policies [Abstract]
Basis of Presentation
Basis of Presentation
The consolidated financial statements include the accounts of Costco Wholesale Corporation, its wholly-owned subsidiaries, subsidiaries in which it has a controlling interest, consolidated entities in which it has made equity investments, or has other interests through which it has majority-voting control or it exercises the right to direct the activities that most significantly impact the entity’s performance. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries and other consolidated entities have been eliminated in consolidation. In July 2012, Costco purchased its former joint venture partner’s 50% equity interest in Costco Mexico. The Company’s net income excludes income attributable to noncontrolling interests in its operations in Mexico prior to the July 2012 acquisition of the 50% noncontrolling interest, Taiwan, and Korea. Subsequent to the acquisition date, 100% of Mexico’s operations are included in “net income attributable to Costco.” Unless otherwise noted, references to net income relate to net income attributable to Costco.
In 2011 and prior to the July 2012 acquisition of the 50% noncontrolling interest in Mexico, the financial position and results of Mexico’s operations were fully consolidated, and the joint venture partner’s share was included in “net income attributable to noncontrolling interests” due to the adoption of a new accounting standard. The initial consolidation of Mexico increased total assets, liabilities, and revenue by approximately 3%, with no impact on net income or net income per common share attributable to Costco. The Company’s equity method investment in Mexico as of August 29, 2010 was derecognized and the noncontrolling interest in Mexico totaling $357 was recognized as part of the initial consolidation of the joint venture on August 30, 2010 as shown in the accompanying consolidated statements of equity.
Fiscal Year End
Fiscal Year End
The Company operates on a 52/53 week fiscal year basis with the fiscal year ending on the Sunday closest to August 31. References to 2013 relate to the 52-week fiscal year ended September 1, 2013. References to 2012 and 2011 relate to the 53-week and 52-week fiscal years ended September 2, 2012 and August 28, 2011, respectively.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
Reclassifications
Reclassifications
Certain reclassifications have been made to prior fiscal year amounts or balances to conform to the presentation in the current fiscal year. These reclassifications did not have a material impact on the Company’s previously reported consolidated financial statements.
Cash and Cash Equivalents
Cash and Cash Equivalents
The Company considers as cash and cash equivalents all highly liquid investments with a maturity of three months or less at the date of purchase and proceeds due from credit and debit card transactions with settlement terms of up to one week. Credit and debit card receivables were $1,254 and $1,161 at the end of 2013 and 2012, respectively.
Short-Term Investments
Short-Term Investments
In general, short-term investments have a maturity at the date of purchase of three months to five years. Investments with maturities beyond five years may be classified, based on the Company’s determination, as short-term based on their highly liquid nature and because they represent the investment of cash that is available for current operations. Short-term investments classified as available-for-sale are recorded at fair value using the specific identification method with the unrealized gains and losses reflected in accumulated other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis and are recorded in interest income and other, net in the consolidated statements of income. Short-term investments classified as held-to-maturity are financial instruments that the Company has the intent and ability to hold to maturity and are reported net of any related amortization and are not remeasured to fair value on a recurring basis.
The Company periodically evaluates unrealized losses in its investment securities for other-than-temporary impairment, using both qualitative and quantitative criteria. In the event a security is deemed to be other-than-temporarily impaired, the Company recognizes the credit loss component in interest income and other, net in the consolidated statements of income. The majority of the Company’s investments are in debt securities.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
The Company accounts for certain assets and liabilities at fair value. The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables and accounts payable, approximate fair value due to their short-term nature or variable interest rates. See Notes 2, 3, and 4 for the carrying value and fair value of the Company’s investments, derivative instruments, and fixed-rate debt, respectively.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs are:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Significant unobservable inputs that are not corroborated by market data.
The Company’s valuation techniques used to measure the fair value of money market mutual funds are based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Valuation methodologies used to measure the fair value of all other non-derivative financial instruments are based on “consensus pricing,” using market prices from a variety of industry-standard independent data providers or pricing that considers various assumptions, including time value, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. All are observable in the market or can be derived principally from or corroborated by observable market data, for which the Company typically receives independent external valuation information.
The Company reports transfers in and out of Levels 1, 2, and 3, as applicable, using the fair value of the individual securities as of the beginning of the reporting period in which the transfer(s) occurred.
The Company’s current financial liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums.
Receivables, Net
Receivables, Net
Receivables consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Vendor receivables
$
581

 
$
545

Reinsurance receivables
238

 
226

Receivables from governmental entities
228

 
87

Third-party pharmacy receivables
102

 
104

Other receivables, net
52

 
64

Receivables, net
$
1,201

 
$
1,026


 
Vendor receivables include payments from vendors in the form of volume rebates or other purchase discounts that are evidenced by signed agreements and are reflected in the carrying value of the inventory when earned or as the Company progresses towards earning the rebate or discount and as a component of merchandise costs as the merchandise is sold. Vendor receivable balances are generally presented on a gross basis, separate from any related payable due. In certain circumstances, these receivables may be settled against the related payable to that vendor. Other consideration received from vendors is generally recorded as a reduction of merchandise costs upon completion of contractual milestones, terms of the related agreement, or by another systematic approach.
Reinsurance receivables are held by the Company’s wholly-owned captive insurance subsidiary. The receivable balance primarily represents amounts ceded through reinsurance arrangements, and are reflected on a gross basis, separate from the amounts assumed under reinsurance, which are presented on a gross basis within other current liabilities on the consolidated balance sheets. Receivables from governmental entities largely consist of tax-related items. Third-party pharmacy receivables generally relate to amounts due from members’ insurance companies for the amount above their co-pay, which is collected at the point-of-sale.
Receivables are recorded net of an allowance for doubtful accounts. Management determines the allowance for doubtful accounts based on historical experience and application of the specific identification method. Write-offs of receivables were immaterial for fiscal years 2013, 2012, and 2011.
Merchandise Inventories
Merchandise Inventories
Merchandise inventories consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
United States (primarily LIFO)
$
5,560

 
$
4,967

Foreign (FIFO)
2,334

 
2,129

Merchandise inventories
$
7,894

 
$
7,096


Merchandise inventories are valued at the lower of cost or market, as determined primarily by the retail inventory method, and are stated using the last-in, first-out (LIFO) method for substantially all U.S. merchandise inventories. Merchandise inventories for all foreign operations are primarily valued by the retail inventory method and are stated using the first-in, first-out (FIFO) method. The Company believes the LIFO method more fairly presents the results of operations by more closely matching current costs with current revenues. The Company records an adjustment each quarter, if necessary, for the projected annual effect of inflation or deflation, and these estimates are adjusted to actual results determined at year-end, when actual inflation rates and inventory levels have been determined.
Due to net deflationary trends in 2013, a benefit of $27 was recorded to merchandise costs, to reduce the cumulative LIFO valuation on merchandise inventories. Due to net inflationary trends in 2012 and 2011, merchandise inventories valued at LIFO were lower than FIFO, resulting in a charge to merchandise costs of $21 and $87, respectively. At the end of 2013 and 2012, the cumulative impact of the LIFO valuation on merchandise inventories was $81 and $108, respectively.
The Company provides for estimated inventory losses between physical inventory counts as a percentage of net sales, using estimates based on the Company’s experience. The provision is adjusted periodically to reflect the results of the actual physical inventory counts, which generally occur in the second and fourth fiscal quarters of the fiscal year. Inventory cost, where appropriate, is reduced by estimates of vendor rebates when earned or as the Company progresses towards earning those rebates, provided that they are probable and reasonably estimable.
Property and Equipment
Property and Equipment
Property and equipment are stated at cost. In general, new building additions are separated into components, each with its own estimated useful life, generally five to fifty years for buildings and improvements and three to twenty years for equipment and fixtures. Depreciation and amortization expense is computed using the straight-line method over estimated useful lives or the lease term, if shorter. Leasehold improvements made after the beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset or the remaining term of the initial lease plus any renewals that are reasonably assured at the date the leasehold improvements are made.
Repair and maintenance costs are expensed when incurred. Expenditures for remodels, refurbishments and improvements that add to or change the way an asset functions or that extend the useful life of an asset are capitalized. Assets that were removed during the remodel, refurbishment or improvement are retired. Assets classified as held for sale were not material at the end of 2013 or 2012.
The Company evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances occur that may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the group’s net carrying value. In the event that the carrying value is not considered recoverable, an impairment loss would be recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held for sale (disposal group), the carrying value is compared to the disposal group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals from third party brokers or other valuation techniques. Impairment charges, included in selling, general and administrative expenses on the consolidated statements of income, in 2013, 2012, and 2011 were immaterial.
Software Costs
The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. These costs are included in equipment and fixtures, and amortized on a straight-line basis over the estimated useful lives of the software, generally three to seven years.
Other Assets
Other Assets
Other assets consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Prepaid rents, lease costs, and long-term deposits
$
236

 
$
230

Receivables from governmental entities
128

 
225

Cash surrender value of life insurance
74

 
76

Goodwill, net
63

 
66

Other
61

 
56

Other Assets
$
562

 
$
653


Receivables from governmental entities largely consists of various tax-related items including amounts deposited with taxing authorities in connection with ongoing income tax audits and non-current deferred tax assets. The Company adjusts the carrying value of its employee life insurance contracts to the net cash surrender value at the end of each reporting period. Goodwill resulting from certain business combinations is reviewed for impairment in the fourth quarter of each fiscal year, or more frequently if circumstances dictate. No impairment of goodwill has been incurred to date.
Accounts Payable
Accounts Payable
The Company’s banking system provides for the daily replenishment of major bank accounts as checks are presented. Included in accounts payable at the end of 2013 and 2012 are $493 and $565, respectively, representing the excess of outstanding checks over cash on deposit at the banks on which the checks were drawn.
Insurance / Self-Insurance Liabilities
Insurance/Self-Insurance Liabilities
The Company uses a combination of insurance and self-insurance mechanisms, including a wholly-owned captive insurance subsidiary and participation in a reinsurance pool, to provide for potential liabilities for workers’ compensation, general liability, property damage, directors’ and officers’ liability, vehicle liability, and employee health care benefits. Liabilities associated with the risks that are retained by the Company are not discounted and are estimated, in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. As of the end of 2013 and 2012, these insurance liabilities were $727 and $688 in the aggregate, respectively, and were included in accounts payable, accrued salaries and benefits, and other current liabilities on the consolidated balance sheets, classified based on their nature.
The Company’s wholly-owned captive insurance subsidiary (the captive) receives direct premiums, which are netted against the Company’s premium costs in selling, general and administrative expenses, in the consolidated statements of income. The captive participates in a reinsurance program that includes other third-party members. The reinsurance agreement is one year in duration, and new agreements are entered into by each participant at their discretion at the commencement of the next calendar year. The member agreements and practices of the reinsurance program limit any participating members’ individual risk. Income statement adjustments related to the reinsurance program and related impacts to the consolidated balance sheets are recognized as information becomes known. In the event the Company leaves the reinsurance program, the Company is not relieved of its primary obligation to the policyholders for activity prior to the termination of the annual agreement.
Other Current Liabilities
Other Current Liabilities
Other current liabilities consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Insurance-related liabilities
$
346

 
$
308

Deferred sales
204

 
159

Cash card liability
159

 
133

Other current liabilities
162

 
135

Sales return reserve
95

 
86

Tax-related liabilities
77

 
88

Vendor consideration liabilities
46

 
57

Other current liabilities
$
1,089

 
$
966

Derivatives
Derivatives
The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business. It manages these fluctuations, in part, through the use of forward foreign-exchange contracts, seeking to economically hedge the impact of fluctuations of foreign exchange on known future expenditures denominated in a non-functional foreign-currency. The contracts relate primarily to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries, whose functional currency is not the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features. The aggregate notional amounts of open, unsettled forward foreign-exchange contracts were $458 and $284 at the end of 2013 and 2012, respectively. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk. The contracts are limited to less than one year in duration. See Note 3 for information on the fair value of unsettled forward foreign-exchange contracts at the end of 2013 and 2012.
The unrealized gains or losses recognized in interest income and other, net in the accompanying consolidated statements of income relating to the net changes in the fair value of unsettled forward foreign-exchange contracts were immaterial in 2013, 2012, and 2011.
The Company is exposed to fluctuations in prices for the energy it consumes, particularly electricity and natural gas, which it seeks to partially mitigate through the use of fixed-price contracts for certain of its warehouses and other facilities, primarily in the U.S. and Canada. The Company also enters into variable-priced contracts for some purchases of electricity and natural gas, in addition to fuel for its gas stations, on an index basis. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and thus require no mark-to-market adjustment.
Foreign Currency
Foreign Currency
The functional currencies of the Company’s international subsidiaries are the local currency of the country in which the subsidiary is located. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Translation adjustments resulting from this process are recorded in accumulated other comprehensive income (loss). Revenues and expenses of the Company’s consolidated foreign operations are translated at average exchange rates prevailing during the year.
The Company recognizes foreign-currency transaction gains and losses related to revaluing all monetary assets and revaluing or settling monetary liabilities denominated in currencies other than the functional currency in interest income and other, net in the accompanying condensed consolidated statements of income. Generally, this includes the U.S. dollar cash and cash equivalents and the U.S. dollar payables of consolidated subsidiaries to their functional currency. Also included are realized foreign-currency gains or losses from settlements of forward foreign-exchange contracts.
Revenue Recognition
Revenue Recognition
The Company generally recognizes sales, which include shipping fees where applicable, net of estimated returns, at the time the member takes possession of merchandise or receives services. When the Company collects payments from customers prior to the transfer of ownership of merchandise or the performance of services, the amounts received are generally recorded as deferred sales, included in other current liabilities on the consolidated balance sheets, until the sale or service is completed. The Company reserves for estimated sales returns based on historical trends in merchandise returns, net of the estimated net realizable value of merchandise inventories to be returned and any estimated disposition costs. Amounts collected from members, which under common trade practices are referred to as sales taxes, are recorded on a net basis.
The Company evaluates whether it is appropriate to record the gross amount of merchandise sales and related costs or the net amount earned as commissions. Generally, when Costco is the primary obligor, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, can influence product or service specifications, or has several but not all of these indicators, revenue and related shipping fees are recorded on a gross basis. If the Company is not the primary obligor and does not possess other indicators of gross reporting as noted above, it records the net amounts as commissions earned, which is reflected in net sales.
The Company accounts for membership fee revenue, net of estimated refunds, on a deferred basis, whereby revenue is recognized ratably over the one-year membership period. The Company’s Executive Members qualify for a 2% reward (up to a maximum of $750 per year on qualified purchases), which can be redeemed at Costco warehouses. The Company accounts for this reward as a reduction in sales. The sales reduction and corresponding liability (classified as accrued member rewards on the consolidated balance sheets) are computed after giving effect to the estimated impact of non-redemptions based on historical data. The net reduction in sales was $970, $900, and $790 in 2013, 2012, and 2011, respectively.
Merchandise Costs
Merchandise Costs
Merchandise costs consist of the purchase price of inventory sold, inbound and outbound shipping charges and all costs related to the Company’s depot operations, including freight from depots to selling warehouses, and are reduced by vendor consideration. Merchandise costs also include salaries, benefits, utilities, and depreciation on production equipment in fresh foods and certain ancillary departments.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, benefits and workers’ compensation costs for warehouse employees, other than fresh foods departments and certain ancillary businesses, as well as all regional and home office employees, including buying personnel. Selling, general and administrative expenses also include utilities, bank charges, rent and substantially all building and equipment depreciation, as well as other operating costs incurred to support warehouse operations.
Marketing and Promotional Expenses
Marketing and Promotional Expenses
Marketing and promotional costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of income.
Stock-Based Compensation
Stock-Based Compensation
Compensation expense for all stock-based awards granted is recognized using the straight-line method. The fair value of restricted stock units (RSUs) is calculated as the market value of the common stock on the measurement date less the present value of the expected dividends forgone during the vesting period.
 
While options and RSUs granted to employees generally vest over five years, all grants allow for quarterly vesting of the pro-rata number of stock-based awards that would vest on the next anniversary of the grant date in the event of retirement or voluntary termination. The Company does not reduce stock-based compensation for an estimate of forfeitures because the estimate is inconsequential in light of historical experience and considering the awards vest on a quarterly basis. The impact of actual forfeitures arising in the event of involuntary termination is recognized as actual forfeitures occur. Stock options have a ten-year term. Stock-based compensation expense is predominantly included in selling, general and administrative expenses on the consolidated statements of income. See Note 7 for additional information on the Company’s stock-based compensation plans.
Leases
Leases
The Company leases land and/or buildings at warehouses and certain other office and distribution facilities, primarily under operating leases. Operating leases expire at various dates through 2062, with the exception of one lease in the Company’s United Kingdom subsidiary, which expires in 2151. These leases generally contain one or more of the following options which the Company can exercise at the end of the initial lease term: (a) renewal of the lease for a defined number of years at the then-fair market rental rate or rate stipulated in the lease agreement; (b) purchase of the property at the then-fair market value; or (c) right of first refusal in the event of a third-party purchase offer.
The Company accounts for its lease expense with free rent periods and step-rent provisions on a straight-line basis over the original term of the lease and any exercised extension options, from the date the Company has control of the property. Certain leases provide for periodic rental increases based on price indices, and some of the leases provide for rents based on the greater of minimum guaranteed amounts or sales volume.
The Company has entered into capital leases for warehouse locations, expiring at various dates through 2040. Capital lease assets are included in buildings and improvements in the accompanying consolidated balance sheets. Amortization expense on capital lease assets is recorded as depreciation expense and is predominately included in selling, general and administrative expenses. Capital lease liabilities are recorded at the lesser of the estimated fair market value of the leased property or the net present value of the aggregate future minimum lease payments and are included in other current liabilities and deferred income taxes and other liabilities. Interest on these obligations is included in interest expense.
The Company’s asset retirement obligations (ARO) are primarily related to leasehold improvements that at the end of a lease must be removed in order to comply with the lease agreement. These obligations are recorded as a liability with an offsetting capital asset at the inception of the lease term based upon the estimated fair market value of the costs to remove the leasehold improvements. These liabilities are accreted over time to the projected future value of the obligation using the Company’s incremental borrowing rate. The capitalized ARO assets are depreciated using the same depreciation convention as the respective leasehold improvement assets and are included with buildings and improvements. Estimated ARO liabilities associated with these leases amounted to $50 and $44 at the end of 2013 and 2012, respectively, and are included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets.
Preopening Expenses
Preopening Expenses
Preopening expenses related to new warehouses, new regional offices and other startup operations are expensed as incurred.
Interest Income and Other, Net
Interest Income and Other, Net
Interest income and other, net includes:
 
 
2013
 
2012
 
2011
Interest income
$
44

 
$
49

 
$
41

Foreign-currency transactions gains, net
39

 
40

 
9

Other, net
14

 
14

 
10

Interest income and other, net
$
97

 
$
103

 
$
60

Income Taxes
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the consolidated financial statements as appropriate. See Note 9 for additional information.
Net Income per Common Share Attributable to Costco
Net Income per Common Share Attributable to Costco
The computation of basic net income per share uses the weighted average number of shares that were outstanding during the period. The computation of diluted net income per share uses the weighted average number of shares in the basic net income per share calculation plus the number of common shares that would be issued assuming exercise and vesting to the participant of all potentially dilutive common shares outstanding using the treasury stock method for shares subject to stock options and restricted stock units and the “if converted” method for the convertible note securities.
Stock Repurchase Programs
Stock Repurchase Programs
Repurchased shares of common stock are retired, in accordance with the Washington Business Corporation Act. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted from additional paid-in capital and retained earnings. See Note 6 for additional information.
Recently Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (FASB) issued guidance that eliminated the option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity is required to present either a continuous statement of net income and other comprehensive income or to present the information in two separate but consecutive statements. The new guidance must be applied retrospectively and was effective for fiscal years and interim periods within those years beginning after December 15, 2011. The Company adopted this guidance at the beginning of its first quarter of 2013.
In September 2011, the FASB issued guidance to amend the rules related to testing goodwill for impairment. The revised guidance allows an initial qualitative evaluation, based on the entity’s events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform further impairment tests. The new guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this guidance at the beginning of its first quarter of 2013. Adoption of this guidance had no impact on the consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
Recent Accounting Pronouncements Not Yet Adopted
In February 2013, the FASB issued guidance related to reclassifications out of accumulated other comprehensive income. An entity will be required to disclose the net income line items impacted by significant reclassifications out of accumulated other comprehensive income if the item is reclassified in its entirety. For other amounts that are not required to be reclassified in their entirety to net income cross-references to other disclosures required under U.S. GAAP are required to provide additional detail about those amounts. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2014. Adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.
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Summary of Significant Accounting Policies (Tables)
12 Months Ended
Sep. 01, 2013
Accounting Policies [Abstract]
Schedule of Receivables, Net
Receivables consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Vendor receivables
$
581

 
$
545

Reinsurance receivables
238

 
226

Receivables from governmental entities
228

 
87

Third-party pharmacy receivables
102

 
104

Other receivables, net
52

 
64

Receivables, net
$
1,201

 
$
1,026

Schedule of Merchandise Inventories
Merchandise inventories consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
United States (primarily LIFO)
$
5,560

 
$
4,967

Foreign (FIFO)
2,334

 
2,129

Merchandise inventories
$
7,894

 
$
7,096

Schedule of Other Assets
Other assets consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Prepaid rents, lease costs, and long-term deposits
$
236

 
$
230

Receivables from governmental entities
128

 
225

Cash surrender value of life insurance
74

 
76

Goodwill, net
63

 
66

Other
61

 
56

Other Assets
$
562

 
$
653

Schedule of Other Current Liabilities
Other current liabilities consist of the following at the end of 2013 and 2012:
 
 
2013
 
2012
Insurance-related liabilities
$
346

 
$
308

Deferred sales
204

 
159

Cash card liability
159

 
133

Other current liabilities
162

 
135

Sales return reserve
95

 
86

Tax-related liabilities
77

 
88

Vendor consideration liabilities
46

 
57

Other current liabilities
$
1,089

 
$
966

Schedule of Interest Income and Other, Net
Interest income and other, net includes:
 
 
2013
 
2012
 
2011
Interest income
$
44

 
$
49

 
$
41

Foreign-currency transactions gains, net
39

 
40

 
9

Other, net
14

 
14

 
10

Interest income and other, net
$
97

 
$
103

 
$
60

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Investments (Tables)
12 Months Ended
Sep. 01, 2013
Investments, Debt and Equity Securities [Abstract]
Available for Sale and Held to Maturity Investments
The Company’s investments at the end of 2013 and 2012, were as follows:
 
2013:
Cost
Basis
 
Unrealized
Gains, Net
 
Recorded
Basis
Available-for-sale:
 
 
 
 
 
Government and agency securities(1)
$
1,263

 
$
0

 
$
1,263

Corporate notes and bonds
9

 
0

 
9

Asset and mortgage-backed securities
5

 
0

 
5

Total available-for-sale
1,277

 
0

 
1,277

Held-to-maturity:
 
 
 
 
 
Certificates of deposit
124

 
 
 
124

Bankers' acceptances
79

 
 
 
79

Total held-to-maturity
203

 
 
 
203

Total Short-Term Investments
$
1,480

 
$
0

 
$
1,480

_______________
(1)
Includes U.S. and Canadian government and agency securities.
 
2012:
Cost
Basis
 
Unrealized
Gains, Net
 
Recorded
Basis
Available-for-sale:
 
 
 
 
 
U.S. government and agency securities
$
776

 
$
6

 
$
782

Corporate notes and bonds
54

 
0

 
54

FDIC-insured corporate bonds
35

 
0

 
35

Asset and mortgage-backed securities
8

 
0

 
8

Total available-for-sale
873

 
6

 
879

Held-to-maturity:
 
 
 
 
 
Certificates of deposit
447

 
 
 
447

Total Short-Term Investments
$
1,320

 
$
6

 
$
1,326

Maturities of Available for Sale and Held to Maturity Securities
The maturities of available-for-sale and held-to-maturity securities at the end of 2013, were as follows:
 
 
Available-For-Sale
 
Held-To-Maturity
 
Cost Basis
 
Fair Value
 
Due in one year or less
$
628

 
$
628

 
$
203

Due after one year through five years
632

 
632

 
0

Due after five years
17

 
17

 
0

 
$
1,277

 
$
1,277

 
$
203

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Fair Value Measurement (Tables)
12 Months Ended
Sep. 01, 2013
Fair Value Disclosures [Abstract]
Fair Value of Financial Assets and Liabilities Measured on Recurring Basis
The tables below present information at the end of 2013 and 2012, respectively, regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy reflecting the valuation techniques utilized to determine such fair value.
 
2013:
Level 1
 
Level 2
Money market mutual funds(1)
$
87

 
$
0

Investment in government and agency securities(2) 
0

 
1,263

Investment in corporate notes and bonds
0

 
9

Investment in asset and mortgage-backed securities
0

 
5

Forward foreign-exchange contracts, in asset position(3)
0

 
3

Forward foreign-exchange contracts, in (liability) position(3)
0

 
(3
)
Total
$
87

 
$
1,277

 
2012:
Level 1
 
Level 2
Money market mutual funds(1)
$
77

 
$
0

Investment in U.S. government and agency securities(2) 
0

 
794

Investment in corporate notes and bonds
0

 
54

Investment in FDIC-insured corporate bonds
0

 
35

Investment in asset and mortgage-backed securities
0

 
8

Forward foreign-exchange contracts, in asset position(3)
0

 
1

Forward foreign-exchange contracts, in (liability) position(3)
0

 
(3
)
Total
$
77

 
$
889

 _______________
(1)
Included in cash and cash equivalents in the accompanying consolidated balance sheets.
(2)
There were no securities included in cash and cash equivalents and $1,263 included in short-term investments in the accompanying consolidated balance sheets at the end of 2013. $12 and $782 included in cash and cash equivalents and short-term investments, respectively, in the accompanying consolidated balance sheets at the end of 2012.
(3)
The asset and the liability values are included in deferred income taxes and other current assets and other current liabilities, respectively, in the accompanying consolidated balance sheets. See Note 1 for additional information on derivative instruments.

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Debt (Tables)
12 Months Ended
Sep. 01, 2013
Debt Disclosure [Abstract]
Schedule of Short-term Debt [Table Text Block]
The weighted average borrowings, maximum borrowings, and weighted average interest rate under all short-term borrowing arrangements, were as follows for 2013 and 2012:
 
Category of Aggregate
Short-term Borrowings
 
Maximum Amount
Outstanding
During the Fiscal Year
 
Average Amount
Outstanding
During the Fiscal Year
 
Weighted Average
Interest Rate
During the Fiscal Year
2013:
 
 
 
 
 
 
Bank borrowings:
 
 
 
 
 
 
Japan
 
$
157

 
$
56

 
0.56
%
Bank overdraft facility:
 
 
 
 
 
 
United Kingdom
 
14

 
4

 
1.50

2012:
 
 
 
 
 
 
Bank borrowings:
 
 
 
 
 
 
Japan
 
$
83

 
$
57

 
0.58
%
Bank overdraft facility:
 
 
 
 
 
 
United Kingdom
 
3

 
0

 
1.50

Carrying Value and Estimated Fair Value of Company's Long-Term Debt
The carrying value and estimated fair value of the Company’s long-term debt at the end of 2013 and 2012 consisted of the following:
 
 
2013
 
2012
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
5.5% Senior Notes due March 2017
$
1,098

 
$
1,248

 
$
1,097

 
$
1,325

0.65% Senior Notes due December 2015
1,199

 
1,200

 
0

 
0

1.125% Senior Notes due December 2017
1,100

 
1,065

 
0

 
0

1.7% Senior Notes due December 2019
1,198

 
1,157

 
0

 
0

Other long-term debt
403

 
412

 
285

 
338

Total long-term debt
4,998

 
5,082

 
1,382

 
1,663

Less current portion
0

 
0

 
1

 
1

Long-term debt, excluding current portion
$
4,998

 
$
5,082

 
$
1,381

 
$
1,662

Schedule of Maturities of Long-term Debt [Table Text Block]
Maturities of long-term debt during the next five fiscal years and thereafter are as follows:
 
2014
$
0

2015
0

2016
1,301

2017
1,099

2018
1,196

Thereafter
1,402

Total
$
4,998

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Leases (Tables)
12 Months Ended
Sep. 01, 2013
Leases [Abstract]
Schedule Of Future Minimum Lease Payments For Capital And Operating Leases
At the end of 2013, future minimum payments, net of sub-lease income of $150 for all years combined, under non-cancelable operating leases with terms of at least one year and capital leases were as follows:
 
 
Operating
Leases
 
Capital
Leases
2014
$
189

 
$
17

2015
175

 
17

2016
167

 
16

2017
160

 
16

2018
153

 
16

Thereafter
1,753

 
338

Total
$
2,597

 
420

Less amount representing interest
 
 
(224
)
Net present value of minimum lease payments
 
 
196

Less current installments(1)
 
 
(4
)
Long-term capital lease obligations less current installments(2)
 
 
$
192

_______________
(1)
Included in other current liabilities.
(2)
Included in deferred income taxes and other liabilities.
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Stockholders' Equity (Tables)
12 Months Ended
Sep. 01, 2013
Stockholders' Equity Note [Abstract]
Stock Repurchased Activity
The following table summarizes the Company’s stock repurchase activity:
 
Shares
Repurchased
(000’s)
 
Average
Price per
Share
 
Total Cost
2013
357

 
$
96.41

 
$
34

2012
7,272

 
84.75

 
617

2011
8,939

 
71.74

 
641

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Stock-Based Compensation Plans (Tables)
12 Months Ended
Sep. 01, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Summary of Stock Option Activity
The following table summarizes stock option transactions during 2013:
 
Number Of
Options
(in 000’s)
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value(1)
Outstanding at the end of 2012
3,161

 
$
40.90

 
 
 
 
Exercised
(1,435
)
 
36.22

 
 
 
 
Special cash dividend
221

 
N/A

 
 
 
 
Outstanding at the end of 2013
1,947

 
$
39.70

 
1.38
 
$
140

 _______________
(1)
The difference between the exercise price and market value of common stock at the end of 2013. 
Summary Of Stock Options Outstanding
The following is a summary of stock options outstanding at the end of 2013:
 
Options Outstanding and Exercisable
Range of Prices(1)
Number of
Options
(in  000’s)
 
Weighted-
Average
Remaining
Contractual
Life
 
Weighted-
Average
Exercise
Price
$34.71–$40.69
1,775

 
1.36
 
$
39.39

$42.73–$43.17
172

 
1.59
 
42.93

 
1,947

 
1.38
 
$
39.70


 _______________
(1) Prices include the effect of the special cash dividend noted above.
Tax Benefits Realized and Intrinsic Value Related to Total Stock Options Exercised
The tax benefits realized, derived from the compensation deductions resulting from the option exercises, and intrinsic value related to total stock options exercised during 2013, 2012, and 2011 are provided in the following table:
 
2013
 
2012
 
2011
Actual tax benefit realized for stock options exercised
$
33

 
$
50

 
$
78

Intrinsic value of stock options exercised(1)
$
94

 
$
137

 
$
227

_______________
(1) The difference between the exercise price and market value of common stock measured at each individual exercise date
Summary of RSU Transactions

The following table summarizes RSU transactions during 2013:
 
Number of
Units
(in 000’s)
 
Weighted-Average
Grant Date Fair
Value
Outstanding at the end of 2012
9,260

 
$
66.14

Granted
4,192

 
90.99

Vested and delivered
(3,872
)
 
67.17

Forfeited
(231
)
 
71.19

Special cash dividend
732

 
N/A

Outstanding at the end of 2013
10,081

 
$
72.52


Summary of Stock-Based Compensation Expense and Related Tax Benefits
The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:
 
2013
 
2012
 
2011
Stock-based compensation expense before income taxes
$
285

 
$
241

 
$
207

Less recognized income tax benefit
(94
)
 
(79
)
 
(67
)
Stock-based compensation expense, net of income taxes
$
191

 
$
162

 
$
140


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Income Taxes (Tables)
12 Months Ended
Sep. 01, 2013
Income Tax Disclosure [Abstract]
Schedule of Income before Income Tax, Domestic and Foreign
Income before income taxes is comprised of the following:
 
 
2013
 
2012
 
2011
Domestic (including Puerto Rico)
$
2,070

 
$
1,809

 
$
1,526

Foreign
981

 
958

 
857

Total
$
3,051

 
$
2,767

 
$
2,383

Schedule of Components of Income Tax Expense (Benefit)
The provisions for income taxes for 2013, 2012, and 2011 are as follows:
 
 
2013
 
2012
 
2011
Federal:
 
 
 
 
 
Current
$
572

 
$
591

 
$
409

Deferred
16

 
12

 
74

Total federal
588

 
603

 
483

State:
 
 
 
 
 
Current
109

 
100

 
78

Deferred
4

 
2

 
14

Total state
113

 
102

 
92

Foreign:
 
 
 
 
 
Current
302

 
312

 
270

Deferred
(13
)
 
(17
)
 
(4
)
Total foreign
289

 
295

 
266

Total provision for income taxes
$
990

 
$
1,000

 
$
841

Schedule of Effective Income Tax Rate Reconciliation
The reconciliation between the statutory tax rate and the effective rate for 2013, 2012, and 2011 is as follows:
 
 
2013
 
2012
 
2011
Federal taxes at statutory rate
$
1,068

 
35.0
 %
 
$
969

 
35.0
 %
 
$
834

 
35.0
 %
State taxes, net
66

 
2.1

 
59

 
2.1

 
55

 
2.4

Foreign taxes, net
(87
)
 
(2.8
)
 
(61
)
 
(2.2
)
 
(66
)
 
(2.8
)
Employee stock ownership plan (ESOP)
(65
)
 
(2.1
)
 
(7
)
 
(0.3
)
 
(6
)
 
(0.3
)
Other
8

 
0.2

 
40

 
1.5

 
24

 
1.0

Total
$
990

 
32.4
 %
 
$
1,000

 
36.1
 %
 
$
841

 
35.3
 %
Schedule of Deferred Tax Assets and Liabilities
The components of the deferred tax assets (liabilities) are as follows:
 
2013
 
2012
Equity compensation
$
80

 
$
79

Deferred income/membership fees
130

 
148

Accrued liabilities and reserves
530

 
461

Other
42

 
55

Property and equipment
(558
)
 
(522
)
Merchandise inventories
(190
)
 
(182
)
Net deferred tax assets
$
34

 
$
39

Schedule Of Gross Unrecognized Tax Benefits Table
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2013 and 2012 is as follows:
 
2013
 
2012
Gross unrecognized tax benefit at beginning of year
$
116

 
$
106

Gross increases—current year tax positions
10

 
15

Gross increases—tax positions in prior years
5

 
3

Gross decreases—tax positions in prior years
(13
)
 
(3
)
Settlements
(38
)
 
(3
)
Lapse of statute of limitations
0

 
(2
)
Gross unrecognized tax benefit at end of year
$
80

 
$
116

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Net Income per Common and Common Equivalent Share (Tables)
12 Months Ended
Sep. 01, 2013
Schedule of Earnings Per Share, Basic and Diluted [Abstract]
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
The following table shows the amounts used in computing net income per share and the effect on net income and the weighted average number of shares of potentially dilutive common shares outstanding (shares in 000’s):
 
 
2013
 
2012
 
2011
Net income available to common stockholders after assumed conversions of dilutive securities
$
2,039

 
$
1,710

 
$
1,463

Weighted average number of common shares used in basic net income per common share
435,741

 
433,620

 
436,119

RSUs and stock options
4,552

 
4,906

 
6,063

Conversion of convertible notes
219

 
847

 
912

Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share
440,512

 
439,373

 
443,094

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Segment Reporting (Tables)
12 Months Ended
Sep. 01, 2013
Segment Reporting [Abstract]
Segment Reporting Information, by Segment
The Company and its subsidiaries are principally engaged in the operation of membership warehouses in the U.S., Canada, Mexico, the United Kingdom, Japan, and Australia and through majority-owned subsidiaries in Taiwan and Korea. The Company’s reportable segments are largely based on management’s organization of the operating segments for operational decisions and assessments of financial performance, which considers geographic locations. The material accounting policies of the segments are the same as described in Note 1. All material inter-segment net sales and expenses have been eliminated in computing total revenue and operating income. Certain operating expenses, predominantly stock-based compensation, are incurred on behalf of the Company's Canadian and Other International Operations, but are included in the U.S. Operations because those costs are not allocated internally and generally come under the responsibility of the Company's U.S. management team.
 
 
United States
Operations
 
Canadian
Operations
 
Other
International
Operations
 
Total
2013
 
 
 
 
 
 
 
Total revenue
$
75,493

 
$
17,179

 
$
12,484

 
$
105,156

Operating income
1,810

 
756

 
487

 
3,053

Depreciation and amortization
696

 
123

 
127

 
946

Additions to property and equipment
1,090

 
186

 
807

 
2,083

Net property and equipment
9,652

 
1,621

 
2,608

 
13,881

Total assets
20,608

 
4,529

 
5,146

 
30,283

2012

 

 

 

Total revenue
$
71,776

 
$
15,717

 
$
11,644

 
$
99,137

Operating income
1,632

 
668

 
459

 
2,759

Depreciation and amortization
667

 
117

 
124

 
908

Additions to property and equipment
1,012

 
170

 
298

 
1,480

Net property and equipment
9,236

 
1,664

 
2,061

 
12,961

Total assets
18,401

 
4,237

 
4,502

 
27,140

2011

 

 

 

Total revenue
$
64,904

 
$
14,020

 
$
9,991

 
$
88,915

Operating income
1,395

 
621

 
423

 
2,439

Depreciation and amortization
640

 
117

 
98

 
855

Additions to property and equipment
876

 
144

 
270

 
1,290

Net property and equipment
8,870

 
1,608

 
1,954

 
12,432

Total assets
18,558

 
3,741

 
4,462

 
26,761

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Quarterly Financial Data (Unaudited) (Tables)
12 Months Ended
Sep. 01, 2013
Quarterly Financial Information Disclosure [Abstract]
Unaudited Quarterly Results of Operations
The two tables that follow reflect the unaudited quarterly results of operations for 2013 and 2012.
 
52 Weeks Ended September 1, 2013
 
First
Quarter
(12 Weeks)
 
Second
Quarter
(12 Weeks)
 
Third
Quarter
(12 Weeks)
 
Fourth
Quarter
(16 Weeks)
 
Total
(52 Weeks)
REVENUE
 
 
 
 
 
 
 
 
 
Net sales
$
23,204

 
$
24,343

 
$
23,552

 
$
31,771

 
$
102,870

Membership fees
511

 
528

 
531

 
716

 
2,286

Total revenue
23,715

 
24,871

 
24,083

 
32,487

 
105,156

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Merchandise costs
20,726

 
21,766

 
21,038

 
28,418

 
91,948

Selling, general and administrative
2,332

 
2,361

 
2,313

 
3,098

 
10,104

Preopening expenses
18

 
6

 
10

 
17

 
51

Operating income
639

 
738

 
722

 
954

 
3,053

OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense
(13
)
 
(25
)
 
(25
)
 
(36
)
 
(99
)
Interest income and other, net
20

 
26

 
15

 
36

 
97

INCOME BEFORE INCOME TAXES
646

 
739

 
712

 
954

 
3,051

Provision for income taxes
225

 
185

(1) 
248

 
332

 
990

Net income including noncontrolling interests
421

 
554

 
464

 
622

 
2,061

Net income attributable to noncontrolling interests
(5
)
 
(7
)
 
(5
)
 
(5
)
 
(22
)
NET INCOME ATTRIBUTABLE TO COSTCO
$
416

 
$
547

 
$
459

 
$
617

 
$
2,039

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
 
 
 
 
 
 
 
 
 
Basic
$
0.96

 
$
1.26

 
$
1.05

 
$
1.41

 
$
4.68

Diluted
$
0.95

 
$
1.24

 
$
1.04

 
$
1.40

 
$
4.63

Shares used in calculation (000’s)
 
 
 
 
 
 
 
 
 
Basic
433,423

 
435,975

 
436,488

 
436,752

 
435,741

Diluted
438,643

 
439,812

 
440,780

 
441,907

 
440,512

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.275

 
$
7.275

(2) 
$
0.31

 
$
0.31

 
$
8.17

_______________
(1)
Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
(2)
Includes the special cash dividend of $7.00 per share paid in December 2012.
Note 13—Quarterly Financial Data (Unaudited) (Continued)
 
53 Weeks Ended September 2, 2012
 
First
Quarter
(12 Weeks)
 
Second
Quarter
(12 Weeks)
 
Third
Quarter
(12 Weeks)
 
Fourth
Quarter
(17 Weeks)
 
Total
(53 Weeks)
REVENUE
 
 
 
 
 
 
 
 
 
Net sales
$
21,181

 
$
22,508

 
$
21,849

 
$
31,524

 
$
97,062

Membership fees
447

 
459

 
475

 
694

 
2,075

Total revenue
21,628

 
22,967

 
22,324

 
32,218

 
99,137

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
Merchandise costs
18,931

 
20,139


19,543

 
28,210

 
86,823

Selling, general and administrative
2,144

(1) 
2,178

 
2,152

 
3,044

 
9,518

Preopening expenses
10

 
6

 
6

 
15

 
37

Operating income
543

 
644

 
623

 
949

 
2,759

OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
Interest expense
(27
)
 
(27
)
 
(19
)
 
(22
)
 
(95
)
Interest income and other, net
37

 
10

 
18

 
38

 
103

INCOME BEFORE INCOME TAXES
553

 
627

 
622

 
965

 
2,767

Provision for income taxes
225

(2) 
215

 
217

 
343

 
1,000

Net income including noncontrolling interests
328

 
412

 
405

 
622

 
1,767

Net income attributable to noncontrolling interests
(8
)
 
(18
)
 
(19
)
 
(13
)
 
(58
)
NET INCOME ATTRIBUTABLE TO COSTCO
$
320

 
$
394

 
$
386

 
$
609

 
$
1,709

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
 
 
 
 
 
 
 
 
 
Basic
$
0.74

 
$
0.91

 
$
0.89

 
$
1.41

 
$
3.94

Diluted
$
0.73

 
$
0.90

 
$
0.88

 
$
1.39

 
$
3.89

Shares used in calculation (000’s)
 
 
 
 
 
 
 
 
 
Basic
434,222

 
434,535

 
433,791

 
432,437

 
433,620

Diluted
440,615

 
439,468

 
439,166

 
438,344

 
439,373

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.24

 
$
0.24

 
$
0.00

(3) 
$
0.55

(4 
) 
$
1.03

_______________
(1)
Includes a $17 charge to selling, general and administrative for contributions to an initiative reforming alcohol beverage laws in Washington State.
(2)
Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
(3)
On May 9, 2012, subsequent to the end of the third quarter of 2012, the Board of Directors declared a quarterly cash dividend of $0.275 per share.
(4)
The quarterly dividend rate was $0.275 per share.
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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended
Sep. 01, 2013
warehouse
Sep. 02, 2012
Aug. 28, 2011
Sep. 01, 2013
Forward Foreign Exchange Contracts
Sep. 02, 2012
Forward Foreign Exchange Contracts
Jul. 31, 2012
Costco Mexico
Sep. 01, 2013
UNITED STATES
warehouse
regions
Sep. 01, 2013
CANADA
warehouse
Sep. 01, 2013
MEXICO
warehouse
Sep. 01, 2013
UNITED KINGDOM
warehouse
Sep. 01, 2013
JAPAN
warehouse
Sep. 01, 2013
TAIWAN, PROVINCE OF CHINA
warehouse
Sep. 01, 2013
KOREA, REPUBLIC OF
warehouse
Sep. 01, 2013
AUSTRALIA
warehouse
Sep. 01, 2013
Building and Building Improvements [Member]
Minimum [Member]
Sep. 01, 2013
Building and Building Improvements [Member]
Maximum [Member]
Sep. 01, 2013
Furniture and Fixtures [Member]
Minimum [Member]
Sep. 01, 2013
Furniture and Fixtures [Member]
Maximum [Member]
Sep. 01, 2013
Software [Member]
Minimum [Member]
Sep. 01, 2013
Software [Member]
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Asset Retirement Obligations, Noncurrent $ 50 $ 44
Maximum Reward Rebate Amount Per Customer Yearly 2.00%
Property, Plant and Equipment, Useful Life 5 years 50 years 3 years 20 years 3 years 7 years
Payments To Acquire Minority Interest 0 789 0
Reduction In Sales 970 900 790
Accrued Insurance 727 688
Outstanding Checks Unpresented For Payment 493 565
Credit and Debit Card Receivables, at Carrying Value 1,254 1,161
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets 357
Number of warehouses operated 634 451 85 33 25 18 10 9 3
Number of regions in country 41
Purchase of equity interest 50.00%
Cumulative Impact To Consolidated Assets Liabilities And Equity From Adoption Of New Accounting Principle 3.00%
Inventory, LIFO Reserve, Period Charge 27 21 87
Inventory LIFO reserve cumulative impact 81 108
Notional amount of forward foreign - exchange derivative $ 458 $ 284
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Summary Of Significant Accounting Policies (Receivables, Net) (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Summary Of Significant Accounting Policies
Vendor receivables $ 581 $ 545
Reinsurance receivables 238 226
Third-party pharmacy receivables 102 104
Receivables from governmental entities 228 87
Other receivables 52 64
Receivables, Net $ 1,201 $ 1,026
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Summary Of Significant Accounting Policies (Merchandise Inventories (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Schedule of Inventory [Line Items]
Inventory, LIFO Reserve, Period Charge $ 27 $ 21 $ 87
Merchandise inventories 7,894 7,096
UNITED STATES
Schedule of Inventory [Line Items]
United States (primarily LIFO) 5,560 4,967
Foreign
Schedule of Inventory [Line Items]
Foreign (FIFO) $ 2,334 $ 2,129
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Summary Of Significant Accounting Policies (Other Assets) (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Summary Of Significant Accounting Policies
Prepaid rents, lease costs, and long-term deposits $ 236 $ 230
Receivables from governmental entities 128 225
Cash surrender value of life insurance 74 76
Goodwill, net 63 66
Other 61 56
Other Assets $ 562 $ 653
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Summary Of Significant Accounting Policies (Other Current Liabilities) (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Summary Of Significant Accounting Policies
Insurance-related liabilities $ 346 $ 308
Deferred sales 204 159
Cash card liability 159 133
Other current liabilities 162 135
Tax-related liabilities 77 88
Sales return reserve 95 86
Vendor consideration liabilities 46 57
Other Current Liabilities $ 1,089 $ 966
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Summary Of Significant Accounting Policies (Interest Income And Other, Net) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Summary Of Significant Accounting Policies
Interest income, net $ 44 $ 49 $ 41
Foreign-currency transactions gains (losses), net 39 40 9
Earnings from affiliates and other, net 14 14 10
Interest Income and Other, Net $ 15 $ 26 $ 20 $ 18 $ 10 $ 37 $ 36 $ 38 $ 97 $ 103 $ 60
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Investments - Available for Sale and Held to Maturity Investments (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis $ 1,277
Available-for-sale, Recorded Basis, Total 1,277
Held-to-maturity, cost basis 203
Total investments, recorded basis 1,480 1,326
Short-term Investments
Available For Sale And Held To Maturity [Line Items]
Unrealized gains 0 6
Total investments, cost basis 1,480 1,320
Total investments, recorded basis 1,480 1,326
Short-term Investments | Available-for-sale Securities
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 1,277 873
Unrealized gains 0 6
Available-for-sale, Recorded Basis, Total 1,277 879
Short-term Investments | Available-for-sale Securities | US Treasury and Government [Member]
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 776
Unrealized gains 6
Available-for-sale, Recorded Basis, Total 782
Short-term Investments | Available-for-sale Securities | Government and agency securities
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 1,263 [1]
Unrealized gains 0 [1]
Available-for-sale, Recorded Basis, Total 1,263 [1]
Short-term Investments | Available-for-sale Securities | Corporate notes and bonds
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 9 54
Unrealized gains 0 0
Available-for-sale, Recorded Basis, Total 9 54
Short-term Investments | Available-for-sale Securities | FDIC-Insured corporate bonds
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 35
Unrealized gains 0
Available-for-sale, Recorded Basis, Total 35
Short-term Investments | Available-for-sale Securities | Asset and mortgage backed securities
Available For Sale And Held To Maturity [Line Items]
Available-For-Sale, Cost Basis 5 8
Unrealized gains 0 0
Available-for-sale, Recorded Basis, Total 5 8
Short-term Investments | Held-to-maturity Securities
Available For Sale And Held To Maturity [Line Items]
Held-to-maturity, cost basis 203
Held-to-maturity, recorded basis 203
Short-term Investments | Held-to-maturity Securities | Banker's Acceptances
Available For Sale And Held To Maturity [Line Items]
Held-to-maturity, cost basis 79
Held-to-maturity, recorded basis 79
Short-term Investments | Held-to-maturity Securities | Certificates of deposit
Available For Sale And Held To Maturity [Line Items]
Held-to-maturity, cost basis 124 447
Held-to-maturity, recorded basis $ 124 $ 447
[1] Includes U.S. and Canadian government and agency securities.
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Investments - Proceeds from Sales of Available for Sale Securities (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Investments, Debt and Equity Securities [Abstract]
Proceeds $ 244 $ 482 $ 602
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Investments - Maturities of Available for Sale and Held to Maturity Securities (Details) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Available-For-Sale, Cost Basis
Due in one year or less $ 628
Due after one year through five years 632
Due after five years 17
Available-For-Sale, Cost Basis, Total 1,277
Available-For-Sale, Fair Value
Due in one year or less 628
Due after one year through five years 632
Due after five years 17
Available-for-sale, Recorded Basis, Total 1,277
Held-To-Maturity
Due in one year or less 203
Due after one year through five years 0
Due after five years 0
Held-To-Maturity, Cost Basis, Total $ 203
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Fair Value Measurement - Fair Value of Financial Assets and Financial Liabilities Measured on Recurring Basis (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis $ 1,277 $ 889
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 87 77
Money Market Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 [1] 0 [1]
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 87 [1] 77 [1]
US Treasury and Government [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 794 [2]
US Treasury and Government [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 [2]
Government and agency securities | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 1,263 [2]
Government and agency securities | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 [2]
Corporate notes and bonds | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 9 54
Corporate notes and bonds | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 0
FDIC-Insured corporate bonds | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 35
FDIC-Insured corporate bonds | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 5 8
Asset-backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 0
Foreign Exchange Forward [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 3 [3] 1 [3]
Fair value of liabilities measured on recurring basis (3) [3] (3) [3]
Foreign Exchange Forward [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Fair value of assets measured on recurring basis 0 [3] 0 [3]
Fair value of liabilities measured on recurring basis $ 0 [3] $ 0 [3]
[1] Included in cash and cash equivalents in the accompanying consolidated balance sheets.
[2] There were no securities included in cash and cash equivalents and $1,263 included in short-term investments in the accompanying consolidated balance sheets at the end of 2013. $12 and $782 included in cash and cash equivalents and short-term investments, respectively, in the accompanying consolidated balance sheets at the end of 2012.
[3] The asset and the liability values are included in deferred income taxes and other current assets and other current liabilities, respectively, in the accompanying consolidated balance sheets. See Note 1 for additional information on derivative instruments.
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Fair Value Measurement - Fair Value of Financial Assets and Financial Liabilities Measured on Recurring Basis (Parenthetical) (Details) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Aug. 29, 2010
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents $ 4,644 $ 3,528 $ 4,009 $ 3,214
Available-for-sale, Recorded Basis, Total 1,277
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Cash and cash equivalents 12
Available-for-sale, Recorded Basis, Total $ 1,263 $ 782
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Debt (Carrying Value and Estimated Fair Value of Company's Long Term Debt) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Debt Instrument [Line Items]
Total long-term debt, carrying value $ 4,998 $ 1,382
Total long-term debt, fair value 5,082 1,663
Less current portion, carrying value 0 1
Less current portion, fair value 0 1
Long-term debt, excluding current portion, carrying value 4,998 1,381
Long-term debt, excluding current portion, fair value 5,082 1,662
5.5% Senior Notes due March 2017
Debt Instrument [Line Items]
Debt instrument, principal due date 2017-03
Debt instrument, stated interest rate (percent) 5.50%
Total long-term debt, carrying value 1,098 1,097
Total long-term debt, fair value 1,248 1,325
0.65% Senior Notes due December 2015
Debt Instrument [Line Items]
Debt instrument, principal due date 2015-12
Debt instrument, stated interest rate (percent) 0.65%
Total long-term debt, carrying value 1,199 0
Total long-term debt, fair value 1,200 0
Senior Notes One Point One Two Five Percent Due December Fifteen Twenty Seventeen [Member]
Debt Instrument [Line Items]
Debt instrument, principal due date 2017-12
Debt instrument, stated interest rate (percent) 1.13%
Total long-term debt, carrying value 1,100 0
Total long-term debt, fair value 1,065 0
Senior Notes One Point Seven Percent Due December Twenty Nineteen [Member]
Debt Instrument [Line Items]
Debt instrument, principal due date 2019-12
Debt instrument, stated interest rate (percent) 1.70%
Total long-term debt, carrying value 1,198 0
Total long-term debt, fair value 1,157 0
Other Long Term Debt
Debt Instrument [Line Items]
Total long-term debt, carrying value 403 285
Total long-term debt, fair value $ 412 $ 338
Senior Notes One Point Seven Percent Due December Twenty Nineteen [Member]
Debt Instrument [Line Items]
Debt Instrument, Frequency of Periodic Payment semi-annually on June 15 and December 15
Senior Notes One Point One Two Five Percent Due December Fifteen Twenty Seventeen [Member]
Debt Instrument [Line Items]
Debt Instrument, Frequency of Periodic Payment semi-annually on June 15 and December 15
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Debt (Schedule Of Short-Term Debt) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
JAPAN
Short-term Debt [Line Items]
Short-term Debt, Maximum Amount Outstanding During Period $ 157 $ 83
Short-term Debt, Average Outstanding Amount 56 57
Short-term Debt, Weighted Average Interest Rate 0.56% 0.58%
UNITED KINGDOM
Short-term Debt [Line Items]
Short-term Debt, Maximum Amount Outstanding During Period 14 3
Short-term Debt, Average Outstanding Amount 4 0
Short-term Debt, Weighted Average Interest Rate 1.50% 1.50%
Short-term Debt [Member]
Short-term Debt [Line Items]
Line of Credit Facility, Current Borrowing Capacity 700 438
Line of Credit Facility, Amount Outstanding $ 36
Short-term Debt [Member] | Minimum [Member]
Short-term Debt [Line Items]
Line of Credit Facility, Interest Rate During Period 0.10%
Short-term Debt [Member] | Maximum [Member]
Short-term Debt [Line Items]
Line of Credit Facility, Interest Rate During Period 4.31%
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Debt (Schedule Of Long-Term Debt Maturities) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Debt Disclosure [Abstract]
2014 $ 0
2015 0
2016 1,301
2017 1,099
2018 1,196
Thereafter 1,402
Total long-term debt, carrying value $ 4,998 $ 1,382
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Debt (Additional Information) (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 07, 2012
Senior Notes [Member]
Feb. 28, 2007
Senior Notes [Member]
Sep. 01, 2013
Short-term Debt [Member]
Sep. 02, 2012
Short-term Debt [Member]
Aug. 31, 1997
Zero Coupon Notes 3 Point 5 Convertible Subordinated Notes [Member]
Sep. 01, 2013
Zero Coupon Notes 3 Point 5 Convertible Subordinated Notes [Member]
Sep. 01, 2013
Senior Notes 5 Point 5 Due March 2017 [Member]
Feb. 28, 2007
Senior Notes 5 Point 5 Due March 2017 [Member]
Sep. 01, 2013
Two Point Six Nine Five Promissory Notes Due October 2017 [Member]
Oct. 31, 2007
Two Point Six Nine Five Promissory Notes Due October 2017 [Member]
Sep. 01, 2013
Yen Tibor Plus Margin Term Loan Due June 2018 [Member]
Sep. 01, 2013
Yen Tibor Plus Margin Term Loan Due June 2018 [Member]
Sep. 02, 2012
Yen Tibor Plus Margin Term Loan Due June 2018 [Member]
Sep. 01, 2013
0.65% Senior Notes due December 2015
Dec. 07, 2012
0.65% Senior Notes due December 2015
Sep. 01, 2013
Senior Notes One Point One Two Five Percent Due December Fifteen Twenty Seventeen [Member]
Dec. 07, 2012
Senior Notes One Point One Two Five Percent Due December Fifteen Twenty Seventeen [Member]
Sep. 01, 2013
Senior Notes One Point Seven Percent Due December Twenty Nineteen [Member]
Dec. 07, 2012
Senior Notes One Point Seven Percent Due December Twenty Nineteen [Member]
Sep. 01, 2013
Private Placement Notes One Point Zero Five Percent Due May Twenty Three [Member] [Member]
May 01, 2013
Private Placement Notes One Point Zero Five Percent Due May Twenty Three [Member] [Member]
Sep. 01, 2013
0.67% Term Loan Due 2016 [Member]
Jul. 31, 2013
0.67% Term Loan Due 2016 [Member]
Sep. 01, 2013
Fixed Rate Note One Point One Eight Percent Due October Twenty Eighteen [Member]
Sep. 02, 2012
Fixed Rate Note One Point One Eight Percent Due October Twenty Eighteen [Member]
Sep. 01, 2013
Minimum [Member]
Short-term Debt [Member]
Sep. 01, 2013
Maximum [Member]
Short-term Debt [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Current Borrowing Capacity $ 700 $ 438
Line of Credit Facility, Amount Outstanding 36
Line of Credit Facility, Interest Rate During Period 0.10% 4.31%
Senior note 3,500 1,200 1,100 1,200
Senior note, interest rate 0.65% 1.13% 1.70%
Debt Instrument, Maturity Date Mar 15, 2017 Oct 1, 2017 Jun 1, 2018 Dec 7, 2015 Dec 15, 2017 Dec 15, 2019 May 1, 2023 Jun 30, 2016 Oct 1, 2018
Debt Instrument, Face Amount 900 1,100
Debt Instrument, Frequency of Periodic Payment Interest is payable semi-annually on March 15 and September 15 of each year until its maturity date. Interest is payable semi-annually Interest is payable semi-annually semi-annually on June 7 and December 7 semi-annually on June 15 and December 15 semi-annually on June 15 and December 15 Interest is payable semi-annually Interest is payable semi-annually interest is payable semi-annually
Long-term Debt 102 102
Debt instrument, stated interest rate (percent) 5.50% 2.70% 1.05% 0.67% 1.18%
Debt Instrument, Basis Spread on Variable Rate 0.35%
Debt Instrument, Interest Rate at Period End 0.68% 0.68% 0.78%
Debt Instrument, Unamortized Discount 6
Redemption Price Company Option 100.00% 100.00%
Redemption Price Certain Events 101.00% 101.00%
Yield To Maturity Percentage 3.50%
Debt Conversion, Converted Instrument, Amount 450
Debt Instrument, Convertible, Number of Equity Instruments 30,000
Debt Instrument, Convertible, Conversion Price $ 22.71
Amount Of Notes Converted $ 899
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Leases (Details) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014 $ 189
2015 175
2016 167
2017 160
2018 153
Thereafter 1,753
Total 2,597
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014 17
2015 17
2016 16
2017 16
2018 16
Thereafter 338
Total 420
Less amount representing interest (224)
Net present value of minimum lease payments 196
Less current installments (4) [1]
Long-term capital lease obligations less current installments $ 192 [2]
[1] Included in other current liabilities.
[2] Included in deferred income taxes and other liabilities.
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Leases - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Leases [Abstract]
Aggregate rental expense $ 225 $ 220 $ 208
Gross assets under capital leases 201 187
Accumulated amortization 28 19
Sub-lease income $ 150
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Stockholders' Equity - Additional Information (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
1 Months Ended 4 Months Ended 12 Months Ended 29 Months Ended
May 09, 2012
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Sep. 01, 2013
Dec. 18, 2012
Nov. 28, 2012
Equity And Comprehensive Income [Line Items]
Dividends declared and paid $ 0.275 $ 0.31 $ 0.275
Special Cash Dividend Declared And Paid Per Share $ 7
Payment Of Special Cash Dividend $ 3,049
Stock repurchase program, amount Authorized 4,000
Stock repurchased amount expiration date April 2015 April 2015 April 2015
Stock repurchase program, amount repurchased 34 617 641 945
Accumulated other comprehensive (loss) income (122) 156 (122) 156 (122)
Reclassification of accumulated unrealized losses on foreign currency translation 789
Accumulated Other Comprehensive Income (Loss)
Equity And Comprehensive Income [Line Items]
Reclassification of accumulated unrealized losses on foreign currency translation $ 155
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Stockholders' Equity (Stock Repurchased During Period) (Detail) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended 29 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Sep. 01, 2013
Stockholders' Equity Note [Abstract]
Shares Repurchased (000's) 357 7,272 8,939
Average Price per Share $ 96.41 $ 84.75 $ 71.74
Total Cost $ 34 $ 617 $ 641 $ 945
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Stock-Based Compensation Plans - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Sep. 01, 2013
Dec. 10, 2012
Sep. 02, 2012
Sep. 01, 2013
Restricted Stock Units (RSUs)
Dec. 10, 2012
Restricted Stock Units (RSUs)
Sep. 02, 2012
Restricted Stock Units (RSUs)
Sep. 01, 2013
Fourth Restated 2002 Plan [Member]
Dec. 05, 2012
Closing [Member]
Dec. 06, 2012
Opening [Member]
Sep. 01, 2013
Employees [Member]
Sep. 01, 2013
Non Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period 5 years 3 years
Share Based Compensation Arrangement By Share Based Payment Number Of Years Of Service 25
Portion of each share issued counted towards limit of shares available 1.75
Additional number of shares authorized 16,000,000 9,143,000
Special Cash Dividend Shares Adjustment Ratio 1.0763
Share Price $ 105.95 $ 98.44
Special Cash Dividend Exercise Price Adjustment Ratio 0.9291
Number of stock options outstanding 1,947,000 2,905,000 3,161,000
Number of RSUs outstanding 9,676,000 10,081,000 9,260,000
Time-based RSUs awards outstanding 9,355,000
Number of shares available to be granted as RSUs 11,174,000
Additional shares available to be granted 1,362,000 778,000
Performance-based RSUs awards outstanding 726,000
Outstanding performance-based RSUs awards to be granted 350,000
Unrecognized compensation cost $ 504
Weighted-average recognition period 1 year 8 months
RSUs vested, but not yet delivered (shares) 3,100,000
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Stock-Based Compensation Plans - Summary of Stock Option Transactions (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Dec. 10, 2012
Number of options
Number of options outstanding at September 2, 2012 3,161,000 2,905,000
Exercised (1,435,000)
Special cash dividend 221,000
Number of options outstanding at September 1, 2013 1,947,000 2,905,000
Weighted-average exercise price
Weighted-average exercise price at September 2, 2012 $ 40.9
Exercised $ 36.22
Weighted-average exercise price at September 1, 2013 $ 39.7
Weighted Average Remaining Contractual Term [Abstract]
Weighted-average remaining contractual term (in years) 1 year 4 months 17 days
Aggregate intrinsic value
Aggregate intrinsic value $ 140 [1]
[1] The difference between the exercise price and market value of common stock at the end of 2013.
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Stock-Based Compensation Plans (Stock Options Outstanding) (Detail) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding and Exercisable - Number of Options 1,947
Options Outstanding and Exercisable - Weighted Average Remaining Contractual Life 1 year 4 months 17 days
Options Outstanding and Exercisable - Weighted Average Exercise Price $ 39.7
$34.71 - $40.69 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Prices, Lower limit $ 34.71 [1]
Range of Prices, Upper limit $ 40.69 [1]
Options Outstanding and Exercisable - Number of Options 1,775
Options Outstanding and Exercisable - Weighted Average Remaining Contractual Life 1 year 4 months 9 days
Options Outstanding and Exercisable - Weighted Average Exercise Price $ 39.39
$42.73 - $43.17 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Prices, Lower limit $ 42.73 [1]
Range of Prices, Upper limit $ 43.17 [1]
Options Outstanding and Exercisable - Number of Options 172
Options Outstanding and Exercisable - Weighted Average Remaining Contractual Life 1 year 7 months 2 days
Options Outstanding and Exercisable - Weighted Average Exercise Price $ 42.93
[1] Prices include the effect of the special cash dividend noted above.
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Stock-Based Compensation Plans - Tax Benefits Realized and Intrinsic Value Related to Stock Options Exercised (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Actual tax benefit realized for stock options exercised $ 33 $ 50 $ 78
Intrinsic value of stock options exercised $ 94 [1] $ 137 [1] $ 227 [1]
[1] The difference between the exercise price and market value of common stock measured at each individual exercise date
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Stock-Based Compensation Plans - Summary of RSU Transactions (Details) (USD $)
Dec. 10, 2012
Sep. 01, 2013
Restricted Stock Units (RSUs)
Number of units
Outstanding at the end of 2012 9,676,000 9,260,000
Granted 4,192,000
Vested and delivered (3,872,000)
Forfeited (231,000)
Special cash dividend 732,000
Outstanding at the end of 2013 9,676,000 10,081,000
Weighted average grant date fair value
Non-vested at September 2, 2012 $ 66.14
Granted $ 90.99
Vested and delivered $ 67.17
Forfeited $ 71.19
Non-vested at September 1, 2013 $ 72.52
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Stock-Based Compensation Plans - Summary of Stock-Based Compensation Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total stock-based compensation expense before income taxes $ 285 $ 241 $ 207
Less recognized income tax benefit (94) (79) (67)
Total stock-based compensation expense, net of income taxes $ 191 $ 162 $ 140
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Retirement Plans - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Day
Sep. 02, 2012
Aug. 28, 2011
Retirement Plans [Line Items]
Minimum number of days of employment to qualify for 401(k) retirement plan 90
Amounts expensed under defined contribution and defined benefit plans $ 409 $ 382 $ 345
US Employees Other Than California Union
Retirement Plans [Line Items]
Deferred pre-tax matching contribution rate of employee benefits 50.00%
California Union Employees
Retirement Plans [Line Items]
Deferred pre-tax matching contribution rate of employee benefits 50.00%
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Income Taxes - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Nov. 28, 2012
Income Tax Disclosure [Abstract]
Income Tax Benefits Allocated Directly To Equity $ 59 $ 65 $ 59
Nonrecurring Tax Expense Benefit 62
Special Cash Dividend Declared And Paid Per Share $ 7
Ownership of employee, shares 22,600,000
Deferred Tax Assets, Net of Valuation Allowance, Current 422 393
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent 62 58
Deferred Tax Liabilities, Net, Noncurrent 450 412
Deferred Tax Liabilities, Undistributed Foreign Earnings 3,619 3,162
Tax Positions Uncertain Timing Of Such Deductibility 36
Unrecognized Tax Benefits that Would Impact Effective Tax Rate 46 36
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued 11 16
Other Tax Expense (Benefit) $ 25
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Income Taxes (Income Before Income Taxes) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Income Tax Disclosure [Abstract]
Domestic (including Puerto Rico) $ 2,070 $ 1,809 $ 1,526
Foreign 981 958 857
INCOME BEFORE INCOME TAXES $ 712 $ 739 $ 646 $ 622 $ 627 $ 553 $ 954 $ 965 $ 3,051 $ 2,767 $ 2,383
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Income Taxes (Schedule of Foreign And Domestic Income Taxes) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Federal [Abstract]
Current $ 572 $ 591 $ 409
Deferred 16 12 74
Total federal 588 603 483
State [Abstract]
Current 109 100 78
Deferred 4 2 14
Total state 113 102 92
Foreign [Abstract]
Current 302 312 270
Deferred (13) (17) (4)
Total foreign 289 295 266
Total provision for income taxes $ 248 $ 185 [1] $ 225 $ 217 $ 215 $ 225 [2] $ 332 $ 343 $ 990 $ 1,000 $ 841
[1] Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
[2] Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
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Income Taxes (Reconciliation Between Statutory And Effective Rates) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Income Tax Disclosure [Abstract]
Federal taxes at statutory rate $ 1,068 $ 969 $ 834
Federal taxes at statutory rate (percent) 35.00% 35.00% 35.00%
State taxes, net 66 59 55
State taxes, net (percent) 2.10% 2.10% 2.40%
Foreign taxes, net (87) (61) (66)
Foreign taxes, net (percent) (2.80%) (2.20%) (2.80%)
Effective Income Tax Rate Reconciliation, Deduction, Employee Stock Ownership Plan Dividend, Amount (65) (7) (6)
Effective Income Tax Rate Reconciliation, Deduction, Employee Stock Ownership Plan Dividend, Percent (2.10%) (0.30%) (0.30%)
Other 8 40 24
Other (percent) 0.20% 1.50% 1.00%
Total provision for income taxes $ 248 $ 185 [1] $ 225 $ 217 $ 215 $ 225 [2] $ 332 $ 343 $ 990 $ 1,000 $ 841
Total (percent) 32.40% 36.10% 35.30%
[1] Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
[2] Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
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Income Taxes (Components of Deferred Tax Assets And Liabilities) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
Sep. 01, 2013
Sep. 02, 2012
Income Tax Disclosure [Abstract]
Equity compensation $ 80 $ 79
Deferred income/membership fees 130 148
Accrued liabilities and reserves 530 461
Other 42 55
Property and equipment (558) (522)
Merchandise inventories (190) (182)
Net deferred tax assets $ 34 $ 39
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Income Taxes (Gross Unrecognized Tax Benefits) (Detail) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Sep. 02, 2012
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Gross unrecognized tax benefit at beginning of year $ 116 $ 106
Gross increases—current year tax positions 10 15
Gross increases—tax positions in prior years 5 3
Gross decreases—tax positions in prior years (13) (3)
Settlements (38) (3)
Lapse of statute of limitations 0 (2)
Gross unrecognized tax benefit at end of year $ 80 $ 116
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Net Income per Common and Common Equivalent Share - Schedule of Earnings per Share Effect on Net Income and Weighted Averegae Number of Dilutive Potential Common Stock (Details) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Earnings Per Share [Abstract]
Net income available to common stockholders after assumed conversion of dilutive securities $ 2,039 $ 1,710 $ 1,463
Weighted average number of common shares used in basic net income per common share 436,488 435,975 433,423 433,791 434,535 434,222 436,752 432,437 435,741 433,620 436,119
RSUs and stock options 4,552 4,906 6,063
Conversion of convertible notes 219 847 912
Weighted average number of common shares and dilutive potential of common stock used in diluted net income per share 440,780 439,812 438,643 439,166 439,468 440,615 441,907 438,344 440,512 439,373 443,094
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Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 01, 2013
Commitments and Contingencies Disclosure [Abstract]
Damages sought $ 10
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Segment Reporting Information by Segment (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Segment Reporting Information [Line Items]
Total revenue $ 24,083 $ 24,871 $ 23,715 $ 22,324 $ 22,967 $ 21,628 $ 32,487 $ 32,218 $ 105,156 $ 99,137 $ 88,915
Operating income 722 738 639 623 644 543 954 949 3,053 2,759 2,439
Depreciation and amortization 946 908 855
Additions to property and equipment 2,083 1,480 1,290
Net property and equipment 13,881 12,961 13,881 12,961 12,432
Total assets 30,283 27,140 30,283 27,140 26,761
United States Operations
Segment Reporting Information [Line Items]
Total revenue 75,493 71,776 64,904
Operating income 1,810 1,632 1,395
Depreciation and amortization 696 667 640
Additions to property and equipment 1,090 1,012 876
Net property and equipment 9,652 9,236 9,652 9,236 8,870
Total assets 20,608 18,401 20,608 18,401 18,558
Canadian Operations
Segment Reporting Information [Line Items]
Total revenue 17,179 15,717 14,020
Operating income 756 668 621
Depreciation and amortization 123 117 117
Additions to property and equipment 186 170 144
Net property and equipment 1,621 1,664 1,621 1,664 1,608
Total assets 4,529 4,237 4,529 4,237 3,741
Other International Operations
Segment Reporting Information [Line Items]
Total revenue 12,484 11,644 9,991
Operating income 487 459 423
Depreciation and amortization 127 124 98
Additions to property and equipment 807 298 270
Net property and equipment 2,608 2,061 2,608 2,061 1,954
Total assets $ 5,146 $ 4,502 $ 5,146 $ 4,502 $ 4,462
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Quarterly Financial Data (Detail) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 4 Months Ended 12 Months Ended
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Nov. 28, 2012
Quarterly Financial Information Disclosure [Abstract]
Nonrecurring Tax Expense Benefit $ 62
Special Cash Dividend Declared And Paid Per Share $ 7
REVENUE
Net sales 23,552 24,343 23,204 21,849 22,508 21,181 31,771 31,524 102,870 97,062 87,048
Membership fees 531 528 511 475 459 447 716 694 2,286 2,075 1,867
Total revenue 24,083 24,871 23,715 22,324 22,967 21,628 32,487 32,218 105,156 99,137 88,915
OPERATING EXPENSES
Merchandise costs 21,038 21,766 20,726 19,543 20,139 18,931 28,418 28,210 91,948 86,823 77,739
Selling, general and administrative 2,313 2,361 2,332 2,152 2,178 2,144 [1] 3,098 3,044 10,104 9,518 8,691
Preopening expenses 10 6 18 6 6 10 17 15 51 37 46
Operating income 722 738 639 623 644 543 954 949 3,053 2,759 2,439
OTHER INCOME (EXPENSE)
Interest expense (25) (25) (13) (19) (27) (27) (36) (22) (99) (95) (116)
Interest income and other, net 15 26 20 18 10 37 36 38 97 103 60
INCOME BEFORE INCOME TAXES 712 739 646 622 627 553 954 965 3,051 2,767 2,383
Provision for income taxes 248 185 [2] 225 217 215 225 [3] 332 343 990 1,000 841
Net income including noncontrolling interests 464 554 421 405 412 328 622 622 2,061 1,767 1,542
Net income attributable to noncontrolling interests (5) (7) (5) (19) (18) (8) (5) (13) (22) (58) (80)
NET INCOME ATTRIBUTABLE TO COSTCO $ 459 $ 547 $ 416 $ 386 $ 394 $ 320 $ 617 $ 609 $ 2,039 $ 1,709 $ 1,462
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO:
Basic $ 1.05 $ 1.26 $ 0.96 $ 0.89 $ 0.91 $ 0.74 $ 1.41 $ 1.41 $ 4.68 $ 3.94 $ 3.35
Diluted $ 1.04 $ 1.24 $ 0.95 $ 0.88 $ 0.9 $ 0.73 $ 1.4 $ 1.39 $ 4.63 $ 3.89 $ 3.3
Shares used in calculation (000's)
Basic (shares) 436,488 435,975 433,423 433,791 434,535 434,222 436,752 432,437 435,741 433,620 436,119
Diluted (shares) 440,780 439,812 438,643 439,166 439,468 440,615 441,907 438,344 440,512 439,373 443,094
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.31 $ 7.275 [4] $ 0.275 $ 0 [5] $ 0.24 $ 0.24 $ 0.31 $ 0.55 [6] $ 8.17 $ 1.03 $ 0.89
[1] Includes a $17 charge to selling, general and administrative for contributions to an initiative reforming alcohol beverage laws in Washington State.
[2] Includes a $62 tax benefit recorded in the second quarter in connection with the special cash dividend paid to employees through the Company's 401(k) Retirement Plan.
[3] Includes a $24 charge relating to the settlement of an income tax audit in Mexico.
[4] Includes the special cash dividend of $7.00 per share paid in December 2012.
[5] On May 9, 2012, subsequent to the end of the third quarter of 2012, the Board of Directors declared a quarterly cash dividend of $0.275 per share.
[6] The quarterly dividend rate was $0.275 per share.
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Quarterly Financial Data (Parenthetical) (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
1 Months Ended 3 Months Ended 4 Months Ended 12 Months Ended
May 09, 2012
May 12, 2013
Feb. 17, 2013
Nov. 25, 2012
May 06, 2012
Feb. 12, 2012
Nov. 20, 2011
Sep. 01, 2013
Sep. 02, 2012
Sep. 01, 2013
Sep. 02, 2012
Aug. 28, 2011
Quarterly Financial Data [Line Items]
Selling, general and administrative $ 2,313 $ 2,361 $ 2,332 $ 2,152 $ 2,178 $ 2,144 [1] $ 3,098 $ 3,044 $ 10,104 $ 9,518 $ 8,691
Settlement of income tax audit in Mexico 24
Dividend declared per share $ 0.275 $ 0.31 $ 0.275
Increase to merchandise costs for LIFO inventory adjustment 27 21 87
Washington State
Quarterly Financial Data [Line Items]
Selling, general and administrative $ 17
[1] Includes a $17 charge to selling, general and administrative for contributions to an initiative reforming alcohol beverage laws in Washington State.
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