Rite Aid 2015 Annual Report Download - page 74

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 28, 2015, March 1, 2014 and March 2, 2013
(In thousands, except per share amounts)
1. Summary of Significant Accounting Policies (Continued)
vendors, inventory shrink, purchasing costs and warehousing costs, which include inbound freight costs
from the vendor, distribution payroll and benefit costs, distribution center occupancy costs and
depreciation expense and delivery expenses to the stores.
Vendor Rebates and Allowances
Rebates and allowances received from vendors relate to either buying and merchandising or
promoting the product. Buying and merchandising related rebates and allowances are recorded as a
reduction of cost of goods sold as product is sold. Buying and merchandising rebates and allowances
include all types of vendor programs such as cash discounts from timely payment of invoices, purchase
discounts or rebates, volume purchase allowances, price reduction allowances and slotting allowances.
Certain product promotion related rebates and allowances, primarily related to advertising, are
recorded as a reduction in selling, general and administrative expenses when the advertising
commitment has been satisfied.
Rent
The Company records rent expense on operating leases on a straight-line basis over the minimum
lease term. The Company begins to record rent expense at the time that the Company has the right to
use the property. From time to time, the Company receives incentive payments from landlords that
subsidize lease improvement construction. These leasehold incentives are deferred and recognized on a
straight-line basis over the minimum lease term.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include store and corporate administrative payroll and
benefit costs, occupancy costs which include retail store and corporate rent costs, facility and leasehold
improvement depreciation and utility costs, advertising, repair and maintenance, insurance, equipment
depreciation and professional fees.
Repairs and Maintenance
Routine repairs and maintenance are charged to operations as incurred. Improvements and major
repairs, which extend the useful life of an asset, are capitalized and depreciated.
Advertising
Advertising costs, net of specific vendor advertising allowances, are expensed in the period the
advertisement first takes place. Advertising expenses, net of vendor advertising allowances, for fiscal
2015, 2014 and 2013 were $318,157, $322,843 and $335,779, respectively.
Insurance
The Company is self-insured for certain general liability and workers’ compensation claims. For
claims that are self-insured, stop-loss insurance coverage is maintained for workers’ compensation
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