Dick's Sporting Goods 2015 Annual Report Download - page 51

Stock-Based Compensation – The Company has the ability to grant restricted shares of common stock, restricted stock units
and stock options to purchase common stock under the Dick's Sporting Goods,€Inc. 2012 Stock and Incentive Plan. The
Company records stock-based compensation expenses based on the fair value of stock awards at the grant date and recognizes
the expense over the related service period.
Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes and provides deferred
income taxes for temporary differences between the amounts reported for assets and liabilities for financial statement purposes
and for income tax reporting purposes, using enacted tax rates in effect in the years in which the differences are expected to
reverse. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the relevant taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the Consolidated Financial Statements from such a position are measured based on the largest benefit
that will more likely than not be realized upon ultimate settlement. Interest and penalties related to income tax matters are
recognized in income tax expense.
Revenue Recognition – Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from eCommerce
sales is recognized upon shipment of merchandise. Service-related revenue is recognized as the services are performed. A
provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that
the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the "cards") is deferred
and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is
recognized on the Consolidated Statements of Income within selling, general and administrative expenses at the point at which
redemption becomes remote. The Company performs an evaluation of the aging of the unredeemed cards, based on the elapsed
time from the date of original issuance, to determine when redemption becomes remote.
Cost of Goods Sold – Cost of goods sold includes the cost of merchandise, vendor allowances, inventory shrinkage, freight,
distribution, shipping and store occupancy costs. The Company defines merchandise margin as net sales less the cost of
merchandise sold. The cost of merchandise includes product costs paid to the vendor, including items such as purchase
discounts and vendor chargebacks, as well as inventory write-downs for the lower of cost or market. Store occupancy costs
include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities,
depreciation, fixture lease expenses and certain insurance expenses.
Selling, General and Administrative Expenses – Selling, general and administrative expenses include store and field support
payroll and fringe benefits, advertising, bank card charges, information systems, marketing, legal, accounting, other store
expenses and all expenses associated with operating the Company's corporate headquarters.
Advertising Costs – Production costs of advertising and the costs to run the advertisements are expensed the first time the
advertisement takes place. Advertising expense, net of cooperative advertising, was $276.3 million, $248.7 million and $223.9
million for fiscal 2015, 2014 and 2013, respectively.
Vendor Allowances – Vendor allowances include allowances, rebates and cooperative advertising funds received from vendors.
These funds are determined for each fiscal year and the majority are based on various quantitative contract terms. Amounts
expected to be received from vendors relating to the purchase of merchandise inventories are recognized as a reduction of cost
of goods sold as the merchandise is sold. Amounts that represent a reimbursement of costs incurred, such as advertising, are
recorded as a reduction to the related expense in the period that the related expense is incurred. The Company records an
estimate of earned allowances based on the latest projected purchase volumes and advertising forecasts.
DICK'S SPORTING GOODS,€INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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