Famous Footwear 2004 Annual Report Download - page 43

Table of Contents
Notes to Consolidated Financial Statements (continued)
BROWN SHOE COMPANY, INC. 2003 FORM 10-K
expensed as incurred. Such warehousing and distribution costs totaled $50.0 million, $51.1 million and $53.1 million in fiscal 2003, 2002
and 2001, respectively. Costs of overseas sourcing offices and other inventory procurement costs are reflected in selling and administrative
expense and are expensed as incurred. Such sourcing and procurement costs totaled $17.6 million, $17.7 million and $19.1 million in fiscal
2003, 2002 and 2001, respectively.
Markdowns are recorded to reflect expected adjustments to sales prices. In determining markdowns, management considers current and
recently recorded sales prices, the length of time the product is held in inventory and quantities of various product styles contained in
inventory, among other factors. The ultimate amount realized from the sale of certain products could differ from management estimates.
Computer Software Costs
The Company capitalizes in other assets certain costs, including internal payroll costs, incurred in connection with the development or
acquisition of software for internal use.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization of property and equipment are provided over the estimated useful
lives of the assets or the remaining lease terms, where applicable, using the straight-line method.
Goodwill and Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. Other
intangible assets are amortized over their useful lives.
Revenue Recognition
Retail sales are net of returns and exclude sales tax. Wholesale sales and sales through the Company’s Web sites are recorded, net of
returns, allowances and discounts, when the merchandise has been shipped and title has passed to the customer. Reserves for projected
merchandise returns, discounts and allowances are carried based on experience. Revenue is recognized on license fees related to Company-
owned brand names, where the Company is licensor, when the related sales of the licensee are made.
Store Closing and Impairment Charges
In fiscal 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for Costs
Associated With Exit or Disposal Activities. Under this pronouncement, the costs of closing stores, including lease termination costs, fixed
assets writeoffs and severance, as applicable, are recorded when the store is closed or when a binding agreement is reached with the
landlord to close the store. In fiscal 2001 and prior, such costs were recorded when the decision was made to close a store.
Asset impairment tests are performed at least annually, on a store-by-store basis. After allowing for an appropriate start-up period, unusual
nonrecurring events or favorable trends, property and equipment at stores indicated as impaired are written down to fair value.
Advertising and Marketing Expense
All advertising and marketing costs are expensed at the time the event occurs or the promotion first appears in media or in the store, except
for direct response advertising that relates primarily to the production and distribution of the Company’s catalogs.
Such costs are amortized over the expected future revenue stream, which is two months from the date catalogs are mailed. In addition, the
Company participates in co-op advertising programs with certain of its wholesale customers. For those co-op advertising programs where the
Company has validated the fair value of the advertising received, co-op advertising costs are reflected as advertising expense. Otherwise, co-
op advertising costs are reflected as a reduction of net sales.
Total advertising and marketing expense was $52.9 million, $55.0 million and $52.8 million in fiscal 2003, 2002 and 2001, respectively. In
fiscal 2003, 2002 and 2001, these costs include co-op advertising costs provided to wholesale
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