LensCrafters 2013 Annual Report Download - page 108

The total expense is recognized over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each reporting period, the Company revises its estimates of the
number of options that are expected to vest based on the non-market vesting conditions. It recognizes the impact of the
revision to original estimates, if any, in the consolidated statement of income, with a corresponding adjustment to
equity.
Recognition of revenues
Revenue is recognized in accordance with IAS 18—Revenue. Revenue includes sales of merchandise (both
wholesale and retail), insurance and administrative fees associated with the Group’s managed vision care business, eye
exams and related professional services, and sales of merchandise to franchisees along with other revenues from
franchisees such as royalties based on sales and initial franchise fee revenues.
Wholesale division revenues are recognized from sales of products at the time title and the risks and rewards of
ownership of the goods are assumed by the customer. The products are not subject to formal customer acceptance
provisions. In some countries, the customer has the right to return products for a limited period of time after the sale, as
such, the Group records an accrual for the estimated amounts to be returned against revenue. This estimate is based on
the Group’s right of return policies and practices along with historical data and sales trends. There are no other post-
shipment obligations. 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. 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 against revenue. 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. 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. 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 assets and liabilities
existing as of the date the consolidated financial statements were authorized for issue.
Estimates are based on historical experience and other factors. The resulting accounting estimates could differ
from the related actual results. Estimates are periodically reviewed and the effects of each change are reflected in the
consolidated statement of income in the period in which the change occurs.