North Face 2015 Annual Report Download - page 89

VF CORPORATION
Notes to Consolidated Financial Statements
December 2015
limits its exposure in the aggregate and to any single counterparty, and adjusts its hedging positions as
appropriate. The impact of VF’s credit risk and the credit risk of its counterparties, as well as the ability of each
party to fulfill its obligations under the contracts, is considered in determining the fair value of the derivative
contracts. Credit risk has not had a significant effect on the fair value of VF’s derivative contracts. VF does not
have any credit risk-related contingent features or collateral requirements with its derivative contracts.
Revenue Recognition
Revenue is recognized when (i) there is a contract or other arrangement of sale, (ii) the sales price is fixed or
determinable, (iii) title and the risks of ownership have been transferred to the customer and (iv) collection of the
receivable is reasonably assured. Sales to wholesale customers and e-commerce sales are generally recognized
when the product has been received by the customer. Sales at VF-operated retail stores are recognized at the time
products are purchased by consumers. Revenue from the sale of gift cards is deferred until the gift card is
redeemed by the customer or the Company determines that the likelihood of redemption is remote and that it
does not have a legal obligation to remit the value of the unredeemed gift card to any jurisdiction under
unclaimed property regulations.
Net sales reflect adjustments for estimated allowances for trade terms, sales incentive programs, discounts,
markdowns, chargebacks and returns. These allowances are estimated based on evaluations of specific product
and customer circumstances, historical and anticipated trends, and current economic conditions.
Shipping and handling costs billed to customers are included in net sales. Sales taxes and value added taxes
collected from customers and remitted directly to governmental authorities are excluded from net sales.
Royalty income is recognized as earned based on the greater of the licensees’ sales of licensed products at
rates specified in the licensing contracts or contractual minimum royalty levels.
Cost of Goods Sold
Cost of goods sold for VF-manufactured goods includes all materials, labor and overhead costs incurred in
the production process. Cost of goods sold for purchased finished goods includes the purchase costs and related
overhead. In both cases, overhead includes all costs related to manufacturing or purchasing finished goods,
including costs of planning, purchasing, quality control, depreciation, freight, duties, royalties paid to third
parties and shrinkage. For product lines with a warranty, a provision for estimated future repair or replacement
costs, based on historical and anticipated trends, is recorded when these products are sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs of product development, selling, marketing and
advertising, VF-operated retail stores, concession retail stores, warehousing, distribution, shipping and handling,
licensing and administration. Advertising costs are expensed as incurred and totaled $712.6 million in 2015,
$713.7 million in 2014 and $671.3 million in 2013. Advertising costs include cooperative advertising payments
made to VF’s customers as reimbursement for their costs of advertising VF’s products, and totaled $61.9 million
in 2015, $62.6 million in 2014 and $58.6 million in 2013. Shipping and handling costs for delivery of products to
customers totaled $348.1 million in 2015, $309.9 million in 2014 and $298.5 million in 2013. Expenses related to
royalty income, including amortization of licensed intangible assets, were $13.0 million in 2015, $13.2 million in
2014 and $13.4 million in 2013.
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