Bed, Bath and Beyond 2007 Annual Report Download - page 20

BED BATH& BEYOND ANNUAL REPORT 2007
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Liabilities associated with the risks that the Company retains are estimated by considering historical claims experience, demo-
graphic factors, severity factors and other actuarial assumptions. Although the Company’s claims experience has not displayed
substantial volatility in the past, actual experience could materially vary from its historical experience in the future. Factors that
affect these estimates include but are not limited to: inflation, the number and severity of claims and regulatory changes. In the
future, if the Company concludes an adjustment to self insurance accruals is required, the liability will be adjusted accordingly.
L. Deferred Rent
The Company accounts for scheduled rent increases contained in its leases on a straight-line basis over the term of the lease
beginning as of the date the Company obtained possession of the leased premises. Deferred rent amounted to $77.8 million and
$74.9 million as of March 1, 2008 and March 3, 2007, respectively.
Cash or lease incentives (“tenant allowances”) received pursuant to certain store leases are recognized on a straight-line basis
as a reduction to rent over the lease term. The unamortized portion of tenant allowances is included in deferred rent and other
liabilities. Tenant allowances amounted to $51.0 million and $34.5 million as of March 1, 2008 and March 3, 2007, respectively.
M. Treasury Stock
The Company’s Board of Directors has authorized repurchases of shares of its common stock for $1 billion in September 2007, for
$1 billion in December 2006, for $200 million in January 2006, for $400 million in October 2005 and for $350 million in December
2004. The Company was authorized to make repurchases from time to time in the open market or through other parameters
approved by the Board of Directors pursuant to existing rules and regulations. During fiscal 2007, the Company repurchased
approximately 20.6 million shares of its common stock at a total cost of approximately $734.2 million. During fiscal 2006, the
Company repurchased approximately 7.5 million shares of its common stock at a total cost of approximately $301.0 million. During
fiscal 2005, the Company repurchased approximately 16.4 million shares of its common stock at a total cost of approximately
$598.2 million.
N. Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, investment securities, accounts payable and certain
other liabilities. The Company’s investment securities consist primarily of available-for-sale debt securities which are stated at their
approximate fair value. The book value of all financial instruments is representative of their fair values with the exception of
certain investment securities (See “Investment Securities,” Note 6).
O. Revenue Recognition
Sales are recognized upon purchase by customers at the Company’s retail stores or upon delivery for products purchased from its
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. Taxes, such as sales tax, use tax and value added tax, are not included in sales.
Revenues from gift cards, gift certificates and merchandise credits are recognized when redeemed. Gift cards have no provisions
for reduction in the value of unused card balances over defined time periods and have no expiration dates, but are subject to
state escheat regulations; as such, the Company does not record income associated with unredeemed gift cards.
Sales returns are provided for in the period that the related sales are recorded based on historical experience. Although the esti-
mate for sales returns has not varied materially from historical provisions, actual experience could vary from historical experience
in the future if the level of sales return activity changes materially. In the future, if the Company concludes that an adjustment to
the sales return accrual is required due to material changes in the returns activity, the reserve will be adjusted accordingly.
P. Cost of Sales
Cost of sales includes the cost of merchandise, buying costs and costs of the Company’s distribution network including inbound
freight charges, distribution facility costs, receiving costs, internal transfer costs and shipping and handling costs.
Q. Vendor Allowances
The Company receives allowances from vendors in the normal course of business for various reasons including direct cooperative
advertising, purchase volume and reimbursement for other expenses. Annual terms for each allowance include the basis for
earning the allowance and payment terms which vary by agreement. All vendor allowances are recorded as a reduction of inven-
tory cost, except for direct cooperative advertising allowances which are specific, incremental and identifiable. The Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)