Bed, Bath and Beyond 2003 Annual Report Download - page 16

BED BATH& BEYOND ANNUAL REPORT 2003
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R. Revenue Recognition
Sales are recognized upon purchase by customers at our retail stores or when shipped for products purchased from
our websites. The value of point of sale coupons and point of sale rebates that result in a reduction of the price paid
by the customer are recorded as a reduction of sales. Shipping and handling fees that are billed to a customer
in a sale transaction are recorded in sales. Revenues from gift cards, gift certificates and merchandise credits are
recognized when redeemed. Sales returns, which are reserved for based on historical experience, are provided for in
the period that the related sales are recorded.
S. Vendor Allowances
The Company receives various types of allowances from our merchandise vendors, which are based on negotiated
terms. These allowances are recorded when earned as a reduction of cost of sales or as a reduction of other costs in
accordance with the provisions of the FASB’s Emerging Issues Task Force Issue No. 02-16, “Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor.”
T. Cost of Sales
Cost of sales includes the cost of merchandise; certain buying, occupancy, warehouse and indirect costs; shipping and
handling costs and free merchandise incentives.
U. Store Opening, Expansion, Relocation and Closing Costs
Store opening, expansion, relocation and closing costs are charged to earnings as incurred. Prior to the adoption of
SFAS No. 146, ”Accounting for Costs Associated with Exit or Disposal Activities,” which was effective for any exit or
disposal activity initiated after December 31, 2002, costs related to store relocations and closings were provided for in
the period in which management approved the relocation or closing of a store.
V. Advertising Costs
Expenses associated with store advertising are charged to earnings as incurred. Net advertising costs amounted to
$93.7 million, $58.8 million and $46.1 million for fiscal 2003, 2002 and 2001, respectively.
W. Income Taxes
The Company files a consolidated Federal income tax return. Separate income tax returns are filed with each state
and territory in which the Company conducts business.
The Company accounts for its income taxes using the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryfor-
wards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.
Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and lia-
bilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is
uncertain. Additionally, the Company’s tax returns are subject to audit by various tax authorities. Although the
Company believes that its estimates are reasonable, actual results could differ from these estimates.
X. Earnings per Share
The Company presents earnings per share on a basic and diluted basis. Basic earnings per share has been computed
by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings per share has been
computed by dividing net earnings by the weighted average number of shares outstanding including the dilutive
effect of stock options.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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