Neiman Marcus 2004 Annual Report Download - page 91

Leases. We lease certain retail stores and office facilities. Stores we own are often subject to ground leases. The terms of our real estate leases,
including renewal options, range from 15 to 99 years. Most leases provide for monthly fixed minimum rentals or contingent rentals based upon sales in excess
of stated amounts and normally require us to pay real estate taxes, insurance, common area maintenance costs and other occupancy costs. For leases that
contain predetermined, fixed calculations of the minimum rentals, we recognize rent expense on a straight-line basis over the lease term.
We receive allowances from developers related to the construction of our stores. We record these allowances as deferred real estate credits which we
recognize as a reduction of rent expense on a straight-line basis over the lease term. We received construction allowances aggregating $26.1 million in 2005,
$2.3 million in 2004 and $29.6 million in 2003. Uncollected balances due from developers are recorded as receivables, included in other assets in the
consolidated balance sheets, and aggregated $4.4 million at July 30, 2005 and $15.2 million at July 31, 2004.
Benefit Plans. We sponsor a noncontributory defined benefit pension plan (Pension Plan) covering substantially all full-time employees and an
unfunded supplemental executive retirement plan (SERP Plan) which provides certain employees additional pension benefits. In calculating our obligations
and related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual determination of expense
involves calculating the estimated total benefits ultimately payable to plan participants and allocating this cost to the periods in which services are expected to
be rendered. We use the projected unit credit method in recognizing pension liabilities. The Pension and SERP Plans are valued annually as of the beginning
of each fiscal year.
Significant assumptions related to the calculation of our obligations include the discount rate used to calculate the actuarial present value of benefit
obligations to be paid in the future, the expected long-term rate of return on assets held by the Pension Plan and the average rate of compensation increase by
plan participants. We review these actuarial assumptions annually based upon currently available information.
Self-insurance and Other Employee Benefit Reserves. We use estimates in the determination of the required accruals for general liability, workers'
compensation and health insurance as well as short-term disability, supplemental executive retirement benefits and postretirement health care benefits. We
base these estimates upon an examination of historical trends, industry claims experience and, in certain cases, calculations performed by third-party experts.
Projected claims information may change in the future and may require us to revise these reserves.
Other Long-term Liabilities. Other long-term liabilities consist primarily of certain employee benefit obligations, postretirement health care benefit
obligations and the liability for scheduled rent increases.
Revenues. Revenues include sales of merchandise and services, net commissions earned from leased departments in our retail stores and delivery and
processing revenues related to merchandise sold. We recognize revenues from our retail operations at the later of the point of sale or the delivery of goods to
the customer. We recognize revenues from our direct marketing operation when the merchandise is delivered to the customer.
We maintain reserves for anticipated sales returns primarily based on our historical trends related to returns by our retail and direct marketing customers.
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