Ross 2008 Annual Report Download - page 41

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39
Allowance for sales returns. An allowance for the gross margin loss on estimated sales returns is included in accrued
expenses and other in the consolidated balance sheets. The allowance for sales returns consists of the following:
($000) Beginning balance Additions Reductions Ending balance
Year ended:
January 31, 2009 $ 4,559 $ 452,035 $ 451,892 $ 4,702
February 2, 2008 $ 4,320 $ 408,434 $ 408,195 $ 4,559
February 3, 2007 $ 6,101 $ 376,173 $ 377,954 $ 4,320
Store pre-opening. Store pre-opening costs are expensed in the period incurred.
Advertising. Advertising costs are expensed in the period incurred. Advertising costs for fiscal 2008, 2007 and 2006 were
$53.9 million, $50.2 million and $45.5 million, respectively.
Stock-based compensation. The Company accounts for stock-based compensation in accordance with SFAS 123(R),
“Share-Based Payment,” which requires recognition of compensation expense based upon the grant date fair value of all
stock-based awards, typically over the vesting period. See Note C for more information on the Company’s stock-based
compensation plans.
Taxes on earnings. The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income
Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other than changes in the tax law or tax rates.
The Company adopted FASB Interpretation No.48, “Accounting for Uncertainty in Income Taxes” (FIN48), which supplements
SFASNo.109 “Accounting for Income Taxes” (SFAS No.109) effective February 4, 2007. FIN 48 clarifies the criteria that an
individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s consolidated
financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement standard for all tax
positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the consolidated
financial statements.
Treasury stock. The Company records treasury stock at cost. Treasury stock includes shares purchased from employees for
tax withholding purposes related to vesting of restricted stock grants.
Earnings per share (“EPS”). SFAS No. 128, “Earnings Per Share,” requires earnings per share to be computed and reported
as both basic EPS and diluted EPS. Basic EPS is computed by dividing net earnings by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted
average number of common shares and dilutive common stock equivalents outstanding during the period. Diluted EPS reflects
the total potential dilution that could occur from outstanding equity plan awards, including unexercised stock options and
unvested shares of both performance and non-performance based awards of restricted stock.
In fiscal 2008, 2007 and 2006 there were 583,000, 1,277,000, and 3,114,000 weighted average shares, respectively, that could
potentially dilute basic EPS in the future that were excluded from the calculation of diluted EPS because their effect would have
been anti-dilutive for those years.