Nordstrom 2015 Annual Report Download - page 41

NOTE 1:€€NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Founded in 1901 as a shoe store in Seattle, Washington, Nordstrom, Inc. is now a leading fashion specialty retailer that offers customers a
well-edited selection of high-quality fashion brands focused on apparel, shoes, cosmetics and accessories for women, men, young adults and
children. This breadth of merchandise allows us to serve a wide range of customers who appreciate quality fashion and a superior shopping
experience. We offer an extensive selection of high-quality brand-name and private label merchandise through multiple retail channels,
including 118 Nordstrom U.S. full-line stores and at Nordstrom.com, three Canada full-line stores, 194 off-price Nordstrom Rack stores,
Nordstromrack.com/HauteLook, five Trunk Club clubhouses and TrunkClub.com, two Jeffrey boutiques and one Last Chance clearance store.
Our stores are located in 39 states throughout the U.S and in three provinces in Canada.
Through our Credit segment, our customers can access a variety of payment products and services, including a Nordstrom-branded private
label card, two Nordstrom-branded Visa credit cards and a debit card for Nordstrom purchases. These credit and debit cards also allow our
customers to participate in our loyalty program designed to increase customer visits and spending. Although the primary purposes of our
Credit segment are to foster greater customer loyalty and drive more sales, through our program agreement with TD Bank, N.A. (‚TDƒ) (see
Note 2: Credit Card Receivable Transaction), we also receive credit card revenue, net in accordance with the program agreement. In
addition, we save on interchange fees that the Retail segment would incur if our customers used non-Nordstrom-branded cards.
Fiscal Year
We operate on a 52/53-week fiscal year ending on the Saturday closest to January•31st. References to 2015 and all years within this
document are based on a 52-week fiscal year, except 2012, which is based on a 53-week fiscal year.
Principles of Consolidation
The Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and
balances are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets
and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial
statements and actual results may differ from these estimates and assumptions. Our most significant accounting judgments and estimates
include revenue recognition, inventory, long-lived assets, goodwill, stock-based compensation and income taxes.
Net Sales
We recognize revenue net of estimated returns and excluding sales taxes. Revenue from sales to customers shipped directly from our stores,
website and catalog, which includes shipping revenue when applicable, is recognized upon estimated receipt by the customer. We estimate
customer merchandise returns based on historical return patterns and reduce sales and cost of sales accordingly. Activity in the allowance for
sales returns, net, for the past three fiscal years is as follows:
Fiscal year 2015 2014 2013
Allowance at beginning of year $160 $128 $116
Additions 2,720 2,129 1,880
Returns, net1(2,710)(2,097)(1,868)
Allowance at end of year $170 $160 $128
1 Returns, net consist of actual returns offset by the value of the merchandise returned and any related sales commission.
Credit Card Revenues, net
On•October•1, 2015, we completed the sale of a substantial majority of our U.S. Visa and private label credit card portfolio to TD (see Note 2:
Credit Card Receivable Transaction). Prior to the close of the credit card receivable transaction, credit card revenues included finance
charges, late fees and other revenue generated by our combined Nordstrom private label card and Nordstrom Visa credit card programs, and
interchange fees generated by the use of Nordstrom Visa credit cards at third-party merchants. Finance charges and late fees were assessed
according to the terms of the related cardholder agreements and recognized as revenue when earned. Credit card revenues were recorded
net of estimated uncollectible finance charges and fees.
Table of Contents
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and per unit amounts
Nordstrom, Inc. and subsidiaries 41