DSW 2009 Annual Report Download - page 53

Amortization expense for fiscal 2009 was $0.9 million. Amortization associated with the net carrying amount
of intangible assets as of January 30, 2010 is $0.9 million for each fiscal year from fiscal 2010 through fiscal 2012
and $0.2 million in fiscal 2013.
Equity Investments — The Company accounts for equity investments using the equity method of accounting
when it exercises significant influence over the investment. If the Company does not exercise significant influence,
the Company accounts for the investment using the cost method of accounting. In fiscal 2009, the Company
purchased an equity investment of $1.2 million, which was included in other assets. The Company did not have any
equity investments in fiscal 2008.
Customer Loyalty Program — The Company maintains a customer loyalty program for the DSW stores and
dsw.com in which program members earn reward certificates that result in discounts on future purchases. Upon
reaching the target-earned threshold, the members receive reward certificates for these discounts which expire six
months after being issued. The Company accrues the anticipated redemptions of the discount earned at the time of
the initial purchase. To estimate these costs, DSW is required to make assumptions related to customer purchase
levels and redemption rates based on historical experience. The accrued liability as of January 30, 2010 and
January 31, 2009 was $9.0 million and $7.3 million, respectively.
Deferred Rent — Many of the Company’s operating leases contain predetermined fixed increases of the
minimum rentals during the initial lease terms. For these leases, the Company recognizes the related rental expense
on a straight-line basis over the original terms of the lease. The Company records the difference between the
amounts charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the
delivery of the lease location by the lessor. The deferred rent included in non-current liabilities was $32.3 million
and $31.9 million as of January 30, 2010 and January 31, 2009, respectively.
Construction and Tenant Allowances — The Company receives cash allowances from landlords, which are
deferred and amortized on a straight-line basis over the original terms of the lease as a reduction of rent expense.
Construction and tenant allowances are included in non-current liabilities and were $59.7 million and $63.7 million
as of January 30, 2010 and January 31, 2009, respectively.
Accumulated Other Comprehensive Income — Accumulated other comprehensive loss of $0.7 million as of
January 31, 2009, related to the Company’s unrealized losses on available-for-sale securities. For fiscal 2009 and
2008, total comprehensive income was $54.6 million and $26.2 million, respectively. In fiscal 2009, DSW
reclassified its unrealized loss to an other-than-temporary impairment and recognized the impairment charge in
earnings.
Sales and Revenue Recognition — Revenues from merchandise sales are recognized upon customer receipt of
merchandise, are net of returns and sales tax and are not recognized until collectability is reasonably assured. For
dsw.com, the Company estimates a time lag for shipments to record revenue when the customer receives the goods
and also includes revenue from shipping and handling in net sales while the related costs are included in cost of
sales.
Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company’s policy is
to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote. In the
fourth quarter of fiscal 2007, the Company determined that it accumulated enough historical data to recognize
income from gift card breakage. The Company recognized $1.1 million, $0.8 million and $0.3 million as other
operating income from gift card breakage during fiscal 2009, 2008 and 2007, respectively.
As of January 30, 2010, the Company supplies footwear, under supply arrangements, to four retailers. Sales for
these leased departments are net of returns and sales tax, as reported by the lessor, and are included in net sales.
Leased department sales represented 9.2%, 11.2% and 12.5% of total net sales for fiscal 2009, 2008 and 2007,
respectively.
F-9
DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)