CompUSA 2013 Annual Report Download - page 53

Accruals —
Management makes estimates and assumptions that affect amounts reported in the consolidated financial statements and
accompanying notes. These estimates are based upon various factors such as the number of units sold, historical and anticipated results and
data received from third party vendors. Actual results could differ from these estimates. Our most significant estimates include those related
to the costs of inventory reserves, sales returns and allowances, cooperative advertising, vendor drop shipments, and customer rebate
reserves, and other vendor and employee related costs.
Income Taxes —
Deferred tax assets and liabilities are recognized for the effect of temporary differences between the book and tax bases of
recorded assets and liabilities and for tax loss carry forwards. The realization of net deferred tax assets is dependent upon our ability to
generate sufficient future taxable income. Where it is more likely than not that some portion or the entire deferred tax asset will not be
realized, we have provided a valuation allowance. If the realization of those deferred tax assets in the future is considered more likely than
not, an adjustment to the deferred tax assets would increase net income in the period such determination is made.
The Company provides for uncertain tax positions and related interest and penalties based upon management’
s assessment of whether a tax
benefit is more likely than not to be sustained upon examination by tax authorities. To the extent the Company prevails in matters for which
a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability, the Company’
s effective tax
rate in a given financial statement period may be affected.
Revenue Recognition and Accounts Receivable —
The Company recognizes sales of products, including shipping revenue, when persuasive
evidence of an order arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably
assured. Generally, these criteria are met at the time the product is received by the customers when title and risk of loss have transferred
except in our Industrial Products segment where title and risk pass at time of shipment. Allowances for estimated subsequent customer
returns, rebates and sales incentives are provided when revenues are recorded. Revenues exclude sales tax collected. The Company
evaluates collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their credit
rating and provides a reserve for accounts that are potentially uncollectible. Trade receivables are generally written off once all collection
efforts have been exhausted. Accounts receivable are shown in the consolidated balance sheets net of allowances for doubtful collections
and subsequent customer returns.
Shipping and handling costs — The Company recognizes shipping and handling costs in cost of sales.
Advertising Costs —
Expenditures for internet, television, local radio and newspaper advertising are expensed in the period the advertising
takes place. Catalog preparation, printing and postage expenditures are amortized over the period of catalog distribution during which the
benefits are expected, generally one to four months.
Net advertising expenses were $60.1 million, $57.7 million and $40.2 million during 2013, 2012 and 2011, respectively, and are included in
the accompanying consolidated statements of operations. The Company utilizes advertising programs to support vendors, including catalogs,
internet and magazine advertising, and receives payments and credits from vendors, including consideration pursuant to volume incentive
programs and cooperative marketing programs. The Company accounts for consideration from vendors as a reduction of cost of sales unless
certain conditions are met showing that the funds are used for specific, incremental, identifiable costs, in which case the consideration is
accounted for as a reduction in the related expense category, such as advertising expense. The amount of vendor consideration recorded as a
reduction of selling, general and administrative expenses totaled $45.9 million, $47.8 million and $59.4 million during 2013, 2012 and
2011, respectively.
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