Kohl's 2011 Annual Report Download - page 60

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KOHL’S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
1. Business and Summary of Accounting Policies (continued)
Advertising
Advertising costs, which include primarily television and radio broadcast, direct mail, and newspaper
circulars, are expensed when the advertisement is first seen. Advertising costs, net of related vendor allowances,
were as follows:
2011 2010 2009
(In Millions)
Gross advertising costs ............................... $1,123 $1,017 $ 988
Vendor allowances ................................... (161) (148) (142)
Net advertising costs ................................. $ 962 $ 869 $ 846
Net advertising costs as a percent of net sales .............. 5.1% 4.7% 4.9%
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets
and liabilities are recorded based on differences between the amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for income tax purposes. Deferred tax assets and
liabilities are calculated using the enacted tax rates and laws that are expected to be in effect when the differences
are expected to reverse. We establish valuation allowances for deferred tax assets when we believe it is more
likely than not that the asset will not be realizable for tax purposes.
We recognize interest and penalty expense related to unrecognized tax benefits in our provision for income
tax expense.
Net Income Per Share
Basic net income per share is net income divided by the average number of common shares outstanding
during the period. Diluted net income per share includes incremental shares assumed to be issued upon exercise
of stock options.
The information required to compute basic and diluted net income per share is as follows:
2011 2010 2009
(In Millions except per share data)
Numerator—net income ................................ $1,167 $1,120 $ 973
Denominator—weighted average shares
Basic ........................................... 270 304 305
Impact of dilutive employee stock options (a) ........... 121
Diluted ......................................... 271 306 306
Net income per share:
Basic ........................................... $ 4.33 $ 3.69 $3.19
Diluted ......................................... $ 4.30 $ 3.66 $3.17
(a) Excludes 11 million options for 2011, 8 million options for 2010 and 17 million options for 2009 as the
impact of such options was antidilutive.
F-14