Petsmart 2012 Annual Report Download - page 56

F-10
matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income
tax rate in a given fiscal period could be materially affected. An unfavorable tax settlement would require use of our cash and
could result in an increase in our effective income tax rate in the period of resolution, while a favorable tax settlement could result
in a reduction in our effective income tax rate in the period of resolution.
Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may
be exposed to losses or gains that could be material.
Other Current Liabilities
Other current liabilities consisted of the following (in thousands):
February 3, 2013 January 29, 2012
Accrued income and sales tax................................................................................................... $ 72,435 $ 42,214
Non-trade accounts payable...................................................................................................... 47,714 53,797
Other(1)..................................................................................................................................... 124,287 105,236
$ 244,436 $ 201,247
________
(1) There are no other individual items within other current liabilities greater than 5% of total current liabilities.
Revenue Recognition
We recognize revenue for store merchandise sales when the customer receives and pays for the merchandise at the register.
Services sales are recognized at the time the service is provided. E-commerce sales are recognized at the time that the customer
receives the product. We defer revenue and the related product costs for shipments that are in-transit to the customer. Customers
typically receive goods within a few days of shipment. Such amounts were immaterial as of February 3, 2013, and January 29,
2012. Amounts related to shipping and handling that are billed to customers are reflected in merchandise sales, and the related
costs are reflected in cost of merchandise sales.
We record deferred revenue for the sale of gift cards and recognize this revenue in net sales when cards are redeemed. Gift
card breakage income is recognized over two years based upon historical redemption patterns and represents the balance of gift
cards for which we believe the likelihood of redemption by the customer is remote. We recognized $2.0 million, $1.8 million and
$1.8 million of gift card breakage income during 2012, 2011 and 2010, respectively. Gift card breakage is recorded monthly and
is included in the Consolidated Statements of Income and Comprehensive Income as a reduction of operating, general and
administrative expenses.
We record allowances for estimated returns based on historical return patterns. These allowances were not material during
2012, 2011 and 2010.
Revenue is recognized net of applicable sales tax in the Consolidated Statements of Income and Comprehensive Income. We
record the sales tax liability in other current liabilities in the Consolidated Balance Sheets.
In accordance with our master operating agreement with Banfield, we charge Banfield license fees for the space used by the
veterinary hospitals and for their portion of utilities costs. We also charge Banfield for its portion of specific operating expenses.
License fees and the reimbursements for specific operating expenses are included in other revenue.
Cost of Merchandise Sales
Cost of merchandise sales includes the following types of expenses:
• Purchase price of inventory sold;
• Transportation costs associated with inventory;
• Inventory shrinkage costs and valuation adjustments;
• Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs, utilities costs
and depreciation;
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)