Best Buy 2012 Annual Report Download - page 79

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$ in millions, except per share amounts or as otherwise noted
79
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 $33, $69 and $139 in fiscal 2012, 2011 and 2010, respectively. A change in the form of vendor contracts
in 2011 has led to a higher proportion of vendor allowances being classified within cost of goods sold.
Advertising Costs
Advertising costs, which are included in SG&A, are expensed the first time the advertisement runs. Advertising costs consist
primarily of print and television advertisements as well as promotional events. Net advertising expenses were $995, $862 and
$709 in fiscal 2012, 2011 and 2010, respectively. Allowances received from vendors for advertising of $98 in fiscal 2010 were
classified as reductions of advertising expenses. As a result of a change in the form of vendor contracts, we received no
allowances from vendors for advertising expenses that were deemed specific, incremental and identifiable in fiscal 2012 or
fiscal 2011.
Pre-Opening Costs
Non-capital expenditures associated with opening new stores are expensed as incurred.
Stock-Based Compensation
We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which
require us to recognize expense for the fair value of our stock-based compensation awards. We recognize compensation
expense on a straight-line basis over the requisite service period of the award (or to an employee's eligible retirement date, if
earlier).
New Accounting Standards
Goodwill Impairment — In September 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance
simplifying how to test goodwill for impairment. Under the new guidance, entities may make a qualitative assessment of the
likelihood of goodwill impairment in order to determine whether a detailed quantitative analysis is required. This new guidance
is effective for fiscal years and interim periods beginning after December 15, 2011. As such, we will adopt the new guidance in
our fiscal quarter ending May 5, 2012. We do not believe our adoption of the new guidance will have an impact on our
consolidated financial position, results of operations or cash flows.
Comprehensive Income — In June 2011, the FASB issued new guidance on the presentation of comprehensive income.
Specifically, the new guidance requires an entity to present components of net income and other comprehensive income in one
continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements.
The new guidance eliminates the current option to report other comprehensive income and its components in the statement of
changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the
components that are recognized in net income or other comprehensive income under current accounting guidance. This new
guidance is effective for fiscal years and interim periods beginning after December 15, 2011. As such, we will adopt the new
guidance in our fiscal quarter ending May 5, 2012.
Fair Value Measurement — In April 2011, the FASB issued new guidance to achieve common fair value measurement and
disclosure requirements between GAAP and International Financial Reporting Standards. This new guidance amends current
fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment
categorization. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. As such,
we will adopt the new guidance in our fiscal quarter ending May 5, 2012. We do not believe our adoption of the new guidance
will have an impact on our consolidated financial position, results of operations or cash flows.
2. Profit Share Buy-Out
During fiscal 2008, we entered into a profit-sharing agreement with Carphone Warehouse Group plc ("Carphone Warehouse")
(the "profit share agreement"). Under the terms of this agreement, Carphone Warehouse provided expertise and certain other
resources to enhance our mobile telephone retail business ("Best Buy Mobile") in return for a share of incremental profits
generated in excess of defined thresholds.