Bed, Bath and Beyond 2012 Annual Report Download - page 25

The Company has authorization 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.
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 U.S. Treasury securities, which are stated at amortized
cost, and auction rate securities, which are stated at their approximate fair value. The book value of all financial instruments is
representative of their fair values (See ‘‘Fair Value Measurements,’’ Note 5).
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.
Sales returns are provided for in the period that the related sales are recorded based on historical experience. Although the
estimate 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 inventory cost, except for direct cooperative advertising allowances which are specific, incremental and
identifiable. The Company recognizes purchase volume allowances as a reduction of the cost of inventory in the quarter in
which milestones are achieved. Advertising costs were reduced by direct cooperative allowances of $19.8 million, $19.5 million
and $17.6 million for fiscal 2012, 2011 and 2010, respectively.
R. Store Opening, Expansion, Relocation and Closing Costs
Store opening, expansion, relocation and closing costs, including markdowns, asset residual values and projected occupancy
costs, are charged to earnings as incurred.
S. Advertising Costs
Expenses associated with direct response advertising are expensed over the period during which the sales are expected to
occur, generally four to seven weeks, and all other expenses associated with store advertising are charged to earnings as
incurred. Net advertising costs amounted to $250.6 million, $192.5 million and $198.3 million for fiscal 2012, 2011 and 2010,
respectively.
T. Stock-Based Compensation
The Company measures all employee stock-based compensation awards using a fair value method and records such expense in
its consolidated financial statements. The Company adopted the accounting guidance related to stock compensation on
August 28, 2005 (the ‘‘date of adoption’’) under the modified prospective application. Under this application, the Company
records stock-based compensation expense for all awards granted on or after the date of adoption and for the portion of
BED BATH & BEYOND 2012 ANNUAL REPORT
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