GameStop 2003 Annual Report Download - page 51

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Table of Contents
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue Recognition
Revenue from the sales of the Company’s products is recognized at the time of sale. The sales of used video game products are recorded at the retail price charged
to the customer. Sales returns (which are not significant) are recognized at the time returns are made.
Subscription and advertising revenues are recorded upon release of magazines for sale to consumers and are stated net of sales discounts. Magazine subscription
revenue is recognized on a straight-line basis over the subscription period.
Pre-Opening Expenses
All costs associated with the opening of new stores are expensed as incurred. Pre-opening expenses are included in selling, general and administrative expenses in
the accompanying consolidated statements of operations.
Closed Store Expenses
Upon a formal decision to close or relocate a store, the Company charges unrecoverable costs to expense. Such costs include the net book value of abandoned
fixtures and leasehold improvements and a provision for future lease obligations, net of expected sublease recoveries. Costs associated with store closings are included
in selling, general and administrative expenses in the accompanying consolidated statements of operations.
Advertising Expenses
The Company expenses advertising costs for newspapers and other media when the advertising takes place. Advertising expenses for newspapers and other media
during the 52 weeks ended January 31, 2004, February 1, 2003 and February 2, 2002, were $7,044, $4,258 and $838, respectively.
Income Taxes
Following the closing of the Offering, Barnes & Noble owned less than 80% of GameStop and, accordingly, is no longer permitted to consolidate GameStop’s
operations for income tax purposes. Accordingly, the financial statements reflect income tax expense as if GameStop had filed separate income tax returns as a
“C” corporation on a stand-alone basis. As a result, the Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting
Standards No. 109 “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 utilizes an asset and liability approach, and deferred taxes are determined based on the
estimated future tax effect of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates.
For the periods prior to the Offering, GameStop was included in the consolidated federal tax return of Barnes & Noble. The income tax provisions recorded in the
financial statements for these periods flowed through the payable to Barnes & Noble.
Foreign Currency Translation
Gamestop has determined that the functional currency of its foreign subsidiary is the subsidiary’s local currency (the EURO). The assets and liabilities of the
subsidiary are translated at the applicable exchange rate as of the end of the balance sheet date and revenue and expenses are translated at an average rate over the
period. Currency translation adjustments are recorded as a component of other comprehensive income.
F-9