Kohl's 2011 Annual Report Download - page 58

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KOHL’S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
1. Business and Summary of Accounting Policies (continued)
Revenue Recognition
Revenue from the sale of merchandise at our stores is recognized at the time of sale, net of any returns.
E-Commerce sales are recorded based on estimated receipt of merchandise by the customer. Net sales do not
include sales tax as we are considered a pass-through conduit for collecting and remitting sales taxes.
Revenue from gift card sales is recognized when the gift card is redeemed. Gift card breakage revenue is
based on historical redemption patterns and represents the balance of gift cards for which we believe the
likelihood of redemption by a customer is remote.
Cost of Merchandise Sold and Selling, General and Administrative Expenses
The following table illustrates the primary costs classified in Cost of Merchandise Sold and Selling, General
and Administrative Expenses:
Cost of Merchandise Sold
Selling, General and
Administrative Expenses
• Total cost of products sold including product
development costs, net of vendor payments other
than reimbursement of specific, incremental and
identifiable costs
• Inventory shrink
• Markdowns
• Freight expenses associated with moving
merchandise from our vendors to our distribution
centers
• Shipping and handling expenses of E-Commerce
sales
• Terms cash discount
• Compensation and benefit costs including:
• Stores
• Corporate headquarters, including buying
and merchandising
• Distribution centers
• Occupancy and operating costs of our retail,
distribution and corporate facilities
• Net revenues from the Kohl’s credit card
program
• Freight expenses associated with moving
merchandise from our distribution centers to our
retail stores, and among distribution and retail
facilities
• Advertising expenses, offset by vendor
payments for reimbursement of specific,
incremental and identifiable costs
• Costs incurred prior to new store openings, such
as advertising, hiring and training costs for new
employees, processing and transporting initial
merchandise, and rent expense
• Other administrative costs
The classification of these expenses varies across the retail industry.
F-12