Dillard's 2012 Annual Report Download - page 62

Notes to Consolidated Financial Statements (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
Denver, Colorado and Bonita Springs, Florida and one property located in Toledo, Ohio. During fiscal
2011, the Company sold its interest in the Denver, Colorado mall joint venture for $11.0 million,
resulting in a gain of $2.1 million that was recorded in gain on disposal of assets.
During fiscal 2011, the Company received a distribution of excess cash from a mall joint venture of
$6.7 million and recorded a related gain of $4.2 million in income on (equity in losses of) joint
ventures.
At February 2, 2013 and January 28, 2012, other assets also included the deferred charge related
to the REIT Transaction of $202.4 million and $207.2 million, respectively. Refer to Note 6 for a
discussion of the REIT Transaction.
Vendor Allowances—The Company receives concessions from its vendors through a variety of
programs and arrangements, including cooperative advertising and margin maintenance programs. The
Company has agreements in place with each vendor setting forth the specific conditions for each
allowance or payment. These agreements range in periods from a few days to up to a year. If the
payment is a reimbursement for costs incurred, it is offset against those related costs; otherwise, it is
treated as a reduction to the cost of the merchandise. Amounts of vendor concessions are recorded
only when an agreement has been reached with the vendor and the collection of the concession is
deemed probable.
For cooperative advertising programs, the Company generally offsets the allowances against the
related advertising expense when incurred. Many of these programs require proof-of-advertising to be
provided to the vendor to support the reimbursement of the incurred cost. Programs that do not
require proof-of-advertising are monitored to ensure that the allowance provided by each vendor is a
reimbursement of costs incurred to advertise for that particular vendor. If the allowance exceeds the
advertising costs incurred on a vendor-specific basis, then the excess allowance from the vendor is
recorded as a reduction of merchandise cost for that vendor.
Margin maintenance allowances are credited directly to cost of purchased merchandise in the
period earned according to the agreement with the vendor. Under the retail method of accounting for
inventory, a portion of these allowances reduces cost of goods sold and a portion reduces the carrying
value of merchandise inventory.
Insurance Accruals—The Company’s consolidated balance sheets include liabilities with respect to
self-insured workers’ compensation and general liability claims. The Company’s self-insured retention is
insured through a wholly-owned captive insurance subsidiary. The Company estimates the required
liability of such claims, utilizing an actuarial method, based upon various assumptions, which include,
but are not limited to, the Company’s historical loss experience, projected loss development factors,
actual payroll and other data. The required liability is also subject to adjustment in the future based
upon the changes in claims experience, including changes in the number of incidents (frequency) and
changes in the ultimate cost per incident (severity). These insurance accruals are recorded in trade
accounts payable and accrued expenses and other liabilities on the consolidated balance sheets.
Operating Leases—The Company leases retail stores, office space and equipment under operating
leases. Many store leases contain construction allowance reimbursements by landlords, rent holidays,
rent escalation clauses and/or contingent rent provisions. The Company recognizes the related rental
expense on a straight-line basis over the lease term and records the difference between the amounts
charged to expense and the rent paid as a deferred rent liability.
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