LensCrafters 2011 Annual Report Download - page 195

| 119 >CONSOLIDATED FINANCIAL STATEMENTS - NOTES
Revenues received for the shipping and handling of goods are included in sales and the
costs associated with shipments to customers are included in operating expenses.
Retail Division revenues are recognized upon receipt by the customer at the retail location
or, for internet and catalogue sales, when goods are shipped to the customer. In some
countries, the Group allows retail customers to return goods for a period of time and, as
such, the Group records an accrual for the estimated amounts to be returned. This accrual
is based on the historical return rate as a percentage of net sales and the timing of the
returns from the original transaction date. There are no other post-shipment obligations.
Additionally, the Retail Division enters into discount programs and similar relationships
with third parties that have terms of twelve or more months. Revenues under these
arrangements are recognized upon receipt of the products or services by the customer at
the retail location. For internet and catalogue sales, advance payments and deposits from
customers are not recorded as revenues until the product is delivered. The Retail Division
also includes managed vision care revenues consisting of both fixed fee and fee-for-
service managed vision care plans. For fixed-fee-plans, the plan sponsor pays the Group a
monthly premium for each enrolled subscriber. Premium revenue is recognized as earned
during the benefit coverage period. Premiums are generally billed in the month of benefit
coverage. Any unearned premium revenue is deferred and recorded within other current
liabilities on the consolidated statement of financial position. For fee for service plans,
the plan sponsor pays the Company a fee to process its claims. Revenue is recognized as
the services are rendered. This revenue is presented as third-party administrative services
revenue. For these programs, the plan sponsor is responsible for funding the cost of
claims. Accruals are established for amounts due under these relationships estimated to
be uncollectible.
Franchise revenues based on sales by franchisees (such as royalties) are accrued and
recognized as earned. Initial franchise fees are recorded as revenue when all material
services or conditions relating to the sale of the franchise have been substantially performed
or satisfied by the Group and when the related store begins operations. Allowances are
established for amounts due under these relationships when they are determined to be
uncollectible.
The Group licenses to third parties the rights to certain intellectual property and other
proprietary information and recognizes royalty revenues when earned.
The Wholesale and Retail Divisions may offer certain promotions during the year. Free
frames given to customers as part of a promotional offer are recorded in cost of sales at the
time they are delivered to the customer. Discounts and coupons tendered by customers
are recorded as a reduction of revenue at the date of sale.
Use of accounting estimates
The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates and assumptions which influence the value of assets and
liabilities as well as revenues and costs reported in the consolidated statement of financial
position and in the consolidated statement of income, respectively or the disclosures
included in the notes to the consolidated financial statements in relation to potential