Summary of Significant Accounting Policies

Basis of presentation. The accompanying unaudited interim condensed consolidated financial statements have been prepared from the records of Ross Stores, Inc. and subsidiaries (the “Company”) without audit and, in the opinion of management, include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company’s financial position as of October 31, 2015 and November 1, 2014, the results of operations and comprehensive income for the three and nine month periods ended October 31, 2015 and November 1, 2014, and cash flows for the nine month periods ended October 31, 2015 and November 1, 2014. The Condensed Consolidated Balance Sheet as of January 31, 2015, presented herein, has been derived from the Company’s audited consolidated financial statements for the fiscal year then ended.

Accounting policies followed by the Company are described in Note A to the audited consolidated financial statements for the fiscal year ended January 31, 2015. Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted for purposes of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, contained in the Company’s Annual Report on Form 10-K for the year ended January 31, 2015.

The results of operations and comprehensive income for the three and nine month periods ended October 31, 2015 and November 1, 2014 presented herein are not necessarily indicative of the results to be expected for the full fiscal year.

Stock dividend. In March 2015, the Company's Board of Directors declared a two-for-one split of the Company's common stock issued in the form of a stock dividend. Stockholders of record as of April 22, 2015 were issued one additional share of common stock on June 11, 2015 for each share held. All share and per share amounts have been adjusted to reflect the stock split.

Restricted cash, cash equivalents, and investments. The Company has restricted cash, cash equivalents, and investments that serve as collateral for certain insurance obligations of the Company. These restricted funds are invested in bank deposits, money market mutual funds, U.S. Government and agency securities, and corporate securities and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The following table summarizes total restricted cash, cash equivalents, and investments which were included in Prepaid expenses and other and Other long-term assets in the Condensed Consolidated Balance Sheets as of October 31, 2015, January 31, 2015, and November 1, 2014:



Restricted Assets ($000)	October 31, 2015		January 31, 2015		November 1, 2014
Prepaid expenses and other	$	19,721	$	19,713	$	22,104
Other long-term assets	56,130		56,107		54,117
Total	$	75,851	$	75,820	$	76,221

The classification between current and long-term is based on the timing of expected payments of the insurance obligations.

Property and equipment. As of October 31, 2015 and November 1, 2014, the Company had $9.2 million and $18.9 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and Equipment, Accounts payable, and Accrued expenses and other in the accompanying Condensed Consolidated Balance Sheets.

Sales mix. The Company’s sales mix is shown below for the three and nine month periods ended October 31, 2015 and November 1, 2014:



	Three Months Ended				Nine Months Ended
	October 31, 2015		November 1, 2014		October 31, 2015		November 1, 2014
Ladies	29	%	29	%	30	%	30	%
Home Accents and Bed and Bath	24	%	25	%	23	%	23	%
Men's	13	%	12	%	13	%	13	%
Shoes	13	%	13	%	13	%	13	%
Accessories, Lingerie, Fine Jewelry, and Fragrances	13	%	13	%	13	%	13	%
Children's	8	%	8	%	8	%	8	%
Total	100	%	100	%	100	%	100	%

Cash Dividends. Dividends included in the Condensed Consolidated Statements of Cash Flows reflect cash dividends paid during the periods shown. Dividends per share reported on the Condensed Consolidated Statements of Earnings reflect cash dividends declared during the periods shown.

The Company's Board of Directors declared cash dividends of $0.1175 per common share in February, May, and August 2015, respectively, and $0.1000 per common share in February, May, August, and November 2014, respectively.

In November 2015, the Company's Board of Directors declared a cash dividend of $0.1175 per common share, payable on December 31, 2015.

Litigation, claims, and assessments. Like many retailers, the Company has been named in class action lawsuits, primarily in California, alleging violation of wage and hour laws and consumer protection laws. Class action litigation remains pending as of October 31, 2015.

The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company may include commercial, product and product safety, customer, intellectual property, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated federal, state, and/or local laws. Actions against the Company are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.

In the opinion of management, the resolution of pending class action litigation and other currently pending legal and regulatory proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Recently issued and adopted accounting standards. In April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). The standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as an asset. ASU 2015-03 is effective for annual and interim reporting periods after December 15, 2015, with early adoption permitted. The Company early adopted ASU 2015-03 retrospectively in its first fiscal quarter ended May 2, 2015. As a result of the retrospective adoption, the Company reclassified unamortized debt issuance costs of $2.8 million and $2.4 million as of January 31, 2015 and November 1, 2014, respectively, from Other long-term assets to a reduction in Long-term debt on the condensed consolidated balance sheets. Adoption of this standard did not impact results of operations, retained earnings, or cash flows in the current or previous interim and annual reporting periods.