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Summary of Significant Accounting Policies | 9 Months Ended
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Nov. 02, 2019
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | (1) Summary of Significant Accounting Policies (a) Description of Business Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as the "Company") is a specialty value retailer offering merchandise targeted at the tween and teen demographic. The Company offers an edited assortment of products, with most priced at $5 and below. The Company’s edited assortment of products includes select brands and licensed merchandise. The Company believes its merchandise is readily available, and that there are a number of potential vendors that could be utilized, if necessary, under approximately the same terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of vendors. The Company is incorporated in the Commonwealth of Pennsylvania and, as of November 2, 2019, operated in 36 states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California, Arkansas, Iowa, Nebraska, and Arizona. As of November 2, 2019 and November 3, 2018, the Company operated 894 stores and 745 stores, respectively, each operating under the name “Five Below”, and sells merchandise on the internet, through the Company's fivebelow.com e-commerce website. (b) Fiscal Year The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2019" or "fiscal 2019" refer to the period from February 3, 2019 to February 1, 2020, which is a 52-week fiscal year. References to "fiscal year 2018" or "fiscal 2018" refer to the period from February 4, 2018 to February 2, 2019, which is a 52-week fiscal year. The fiscal quarters ended November 2, 2019 and November 3, 2018 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended November 2, 2019 and November 3, 2018 refer to the thirty-nine weeks ended as of those dates. (c) Basis of Presentation The consolidated balance sheets as of November 2, 2019 and November 3, 2018, the consolidated statements of operations for the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018, the consolidated statements of shareholders’ equity for the thirty-nine weeks ended November 2, 2019 and November 3, 2018 and the consolidated statements of cash flows for the thirty-nine weeks ended November 2, 2019 and November 3, 2018 have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the aforementioned financial statements include all known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions that impact the financial statements) necessary to present fairly the financial position at the balance sheet dates and the results of operations and cash flows for the periods ended November 2, 2019 and November 3, 2018. The balance sheet as of February 2, 2019, presented herein, has been derived from the audited balance sheet included in the Company's Annual Report on Form 10-K for fiscal 2018 as filed with the Securities and Exchange Commission on March 28, 2019 and referred to herein as the “Annual Report,” but does not include all annual disclosures required by U.S. GAAP. These consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended February 2, 2019 and footnotes thereto included in the Annual Report. The consolidated results of operations for the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018 are not necessarily indicative of the consolidated operating results for the year ending February 1, 2020 or any other period. The Company's business is seasonal and as a result, the Company's net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season. (d) Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. On February 4, 2018, the Company adopted the pronouncement using the modified retrospective method by recognizing the cumulative effect of gift card breakage as an adjustment to retained earnings resulting in a $0.5 million increase to retained earnings. In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. On February 3, 2019, the Company adopted this pronouncement on a modified retrospective basis and applied the new standard to all leases. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. At adoption, the new standard had a material impact on the Company's balance sheets resulting in an increase in net assets and liabilities of approximately $618 million, as the Company has a significant number of leases for its stores. Although the standard impacts the treatment of certain initial direct leases costs that were previously capitalizable, it did not materially impact the Company's consolidated statements of operations and had no impact on the Company's cash flows. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the rate implicit in the lease is not readily determinable for the Company's leases, the Company utilizes its incremental borrowing rate to determine the present value of future lease payments. The incremental borrowing rate represents a significant judgment and is determined based on an analysis of our synthetic credit rating, prevailing financial market conditions, corporate bond yields, treasury bond yields, and the effect of collateralization. The operating lease assets also include lease payments made before commencement and exclude lease incentives. The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years. For real estate leases, except for renewals that generally take the lease to a ten-year term, the options to renew are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and regularly opens, relocates or closes stores to align with its operating strategy. Generally, except for renewals that generally take the lease to a ten-year term, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease asset and operating lease liability as the exercise of such options is not reasonably certain. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease. For certain real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease assets and operating lease liabilities. See Note 3 ‘‘Leases’’ for additional information. Impact of New Lease Standard on Balance Sheet Line Items As a result of applying the new lease standard using the modified retrospective method, the following adjustments were made to accounts on the consolidated balance sheet as of February 3, 2019 (in thousands):
| Impact of ASC 842 Adoption
| As Reported February 2, 2019 |  | Adjustments |  | Adjusted February 3, 2019
Assets |  |  |  |  |
Current assets: |  |  |  |  |
Prepaid expenses and other current assets | 60,124 |  |  | (11,077 | ) |  | 49,047 |
Total current assets | 642,257 |  |  | (11,077 | ) |  | 631,180 |
Operating lease assets | — |  |  | 628,924 |  |  | 628,924 |
| $ | 952,264 |  |  | $ | 617,847 |  |  | $ | 1,570,111 |
Liabilities and Shareholders’ Equity |  |  |  |  |
Current liabilities: |  |  |  |  |
Other accrued expenses | 104,201 |  |  | (8,033 | ) |  | 96,168 |
Total current liabilities | 253,105 |  |  | (8,033 | ) |  | 245,072 |
Deferred rent and other | 84,065 |  |  | (84,065 | ) |  | — |
Long-term operating lease liabilities | — |  |  | 709,945 |  |  | 709,945 |
Total liabilities | 337,170 |  |  | 617,847 |  |  | 955,017 |
Shareholders’ equity: |  |  |  |  |
Total shareholders’ equity | 615,094 |  |  | — |  |  | 615,094 |
| $ | 952,264 |  |  | $ | 617,847 |  |  | $ | 1,570,111 |
In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. During the thirteen weeks ended November 3, 2018, the Company adopted the pronouncement using the prospective transition method and it did not have a significant impact to the Company's financial statements. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," which addresses certain fair value disclosure requirements, the measurement basis under the measurement alternative and which equity securities have to be remeasured at historical exchange rates. In May 2019, the FASB issued "Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief," which allows entities to elect to measure assets in the scope of ASC 326-20, using the fair value option when ASU 2016-13 is adopted. The effective date of the standards will be for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted for annual periods beginning after December 15, 2018. The new standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align the Company's credit loss methodology with the new standard. While the Company is currently evaluating the impact to its consolidated financial statements of adopting this guidance, the Company does not anticipate that the guidance will materially impact its consolidated financial statements. (e) Use of Estimates The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, valuation allowances for inventories, income taxes, share-based compensation expense and the incremental borrowing rate utilized in operating lease liabilities. (g) Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Inputs, other than Level 1, that are either directly or indirectly observable. Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market participants would use. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The Company’s financial instruments consist primarily of cash equivalents, short-term and long-term investment securities, accounts payable, and borrowings, if any, under a line of credit. The Company believes that: (1) the carrying value of cash equivalents and accounts payable are representative of their respective fair value due to the short-term nature of these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit approximates fair value because the line of credit’s interest rates vary with market interest rates. Under the fair value hierarchy, the fair market values of the short-term and long-term investments in corporate bonds are level 1 while the short-term and long-term investments in municipal bonds are level 2. The fair market values of level 2 instruments are determined by management with the assistance of a third party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities. As of November 2, 2019, February 2, 2019, and November 3, 2018, the Company had cash equivalents of $64.3 million, $215.7 million and $84.9 million, respectively. The Company’s cash equivalents consist of credit and debit card receivables, money market funds, and corporate bonds with original maturities of 90 days or less. Fair value for cash equivalents was determined based on level 1 inputs. As of November 2, 2019, February 2, 2019, and November 3, 2018, the Company's short-term investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):
|  | As of November 2, 2019
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Short-term: |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 53,996 |  |  | $ | 48 |  |  | $ | — |  |  | $ | 54,044 |
Municipal bonds |  | 76 |  |  | — |  |  | — |  |  | 76 |
Total |  | $ | 54,072 |  |  | $ | 48 |  |  | $ | — |  |  | $ | 54,120 |
|  | As of February 2, 2019
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Short-term: |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 83,128 |  |  | $ | — |  |  | $ | 63 |  |  | $ | 83,065 |
Municipal bonds |  | 2,284 |  |  | — |  |  | 2 |  |  | 2,282 |
Total |  | $ | 85,412 |  |  | $ | — |  |  | $ | 65 |  |  | $ | 85,347 |
|  | As of November 3, 2018
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Short-term: |  |  |  |  |  |  |  |
Corporate bonds |  | $ | 82,710 |  |  | $ | — |  |  | $ | 194 |  |  | $ | 82,516 |
Municipal bonds |  | 2,319 |  |  | — |  |  | 7 |  |  | 2,312 |
Total |  | $ | 85,029 |  |  | $ | — |  |  | $ | 201 |  |  | $ | 84,828 |
Short-term investment securities as of November 2, 2019, February 2, 2019, and November 3, 2018 all mature in one year or less. (h) Prepaid Expenses and Other Current Assets Prepaid expenses as of November 2, 2019, February 2, 2019, and November 3, 2018 were $18.8 million, $26.1 million, and $32.1 million, respectively. Other current assets as of November 2, 2019, February 2, 2019, and November 3, 2018 were $39.9 million, $34.0 million, and $27.4 million, respectively. (i) Other Accrued Expenses Other accrued expenses include accrued capital expenditures of $30.6 million, $54.2 million, and $12.9 million as of November 2, 2019, February 2, 2019, and November 3, 2018, respectively.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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