Best Buy 2011 Annual Report Download - page 86

$ in millions, except per share amounts or as otherwise noted
Cost of Goods Sold and Selling, General and Administrative Expenses
The following table illustrates the primary costs classified in each major expense category:
Cost of Goods Sold
• Total cost of products sold including:
—Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers;
—Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs to promote a vendor’s
products; and
—Cash discounts on payments to merchandise vendors;
• Cost of services provided including:
—Payroll and benefits costs for services employees; and
—Cost of replacement parts and related freight expenses;
• Physical inventory losses;
• Markdowns;
• Customer shipping and handling expenses;
• Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs, and
depreciation; and
• Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores.
SG&A
• Payroll and benefit costs for retail and corporate employees;
• Occupancy and maintenance costs of retail, services and corporate facilities;
• Depreciation and amortization related to retail, services and corporate assets;
• Advertising costs;
• Vendor allowances that are a reimbursement of specific, incremental and identifiable costs to promote a vendor’s
products;
• Tender costs, including bank charges and costs associated with credit and debit card interchange fees;
• Charitable contributions;
• Outside and outsourced service fees;
• Long-lived asset impairment charges; and
• Other administrative costs, such as supplies, and travel and lodging.
Vendor Allowances
We receive funds from vendors for various programs, primarily as reimbursements for costs such as markdowns, margin
protection, advertising and sales incentives.
Vendor allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to promote a
vendor’s products are included as an expense reduction when the cost is incurred. All other vendor allowances are
generally in the form of receipt-based funds or sell-through credits. Receipt-based funds are generally determined based
on our level of inventory purchases and initially deferred and recorded as a reduction of merchandise inventories. The
deferred amounts are then included as a reduction of cost of goods sold when the related product is sold. Sell-through
credits are generally based on the number of units we sell over a specified period and are recognized when the related
product is sold.
Vendor allowances included in SG&A for reimbursement of specific, incremental and identifiable costs to promote and sell
a vendor’s products were $69, $139 and $161 in fiscal 2011, 2010 and 2009, respectively. The decrease for fiscal
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