Abercrombie & Fitch 2009 Annual Report Download - page 58

SHAREHOLDERS’ EQUITY
At January 30, 2010 and January 31, 2009, there were 150 million shares of A&F’s $.01 par value
Class A Common Stock authorized, of which 88.0 million and 87.6 million shares were outstanding at
January 30, 2010 and January 31, 2009, respectively, and 106.4 million shares of $.01 par value Class B
Common Stock authorized, none of which were outstanding at January 30, 2010 and January 31, 2009. In
addition, 15 million shares of A&F’s $.01 par value Preferred Stock were authorized, none of which have been
issued. See Note 17, “Preferred Stock Purchase Rights” for information about Preferred Stock Purchase
Rights.
Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock,
except holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to three votes per share on all matters submitted to a vote of shareholders.
REVENUE RECOGNITION
The Company recognizes retail sales at the time the customer takes possession of the merchandise.
Direct-to-consumer sales are recorded based on an estimated date for customer receipt of merchandise.
Amounts relating to shipping and handling billed to customers in a sale transaction are classified as revenue
and the related direct shipping and handling costs are classified as Stores and Distribution Expense. Associate
discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates
based on historical experience and various other assumptions that management believes to be reasonable. The
sales return reserve was $11.7 million, $9.1 million and $10.7 million at January 30, 2010, January 31, 2009
and February 2, 2008, respectively.
The Company sells gift cards in its stores and through direct-to-consumer operations. The Company
accounts for gift cards sold to customers by recognizing a liability at the time of sale. Gift cards sold to
customers do not expire or lose value over periods of inactivity. The liability remains on the Company’s books
until the earlier of redemption (recognized as revenue) or when the Company determines the likelihood of
redemption is remote (recognized as other operating income). The Company determines the probability of the
gift card being redeemed to be remote based on historical redemption patterns. At January 30, 2010 and
January 31, 2009, the gift card liabilities on the Company’s Consolidated Balance Sheets were $49.8 million
and $57.5 million, respectively.
The Company is not required by law to escheat the value of unredeemed gift cards to the states in which it
operates. During Fiscal 2009, Fiscal 2008 and Fiscal 2007, the Company recognized other operating income
for adjustments to the gift card liability of $9.0 million, $8.2 million and $10.8 million, respectively.
The Company does not include tax amounts collected as part of the sales transaction in its net sales
results.
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ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)