Ross 2009 Annual Report Download - page 43

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— 41 —
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 Returns Ending balance
Year ended:
January 30, 2010 $ 4,702 $ 506,249 $ (505,607) $ 5,344
January 31, 2009 $ 4,559 $ 452,035 $ (451,892) $ 4,702
February 2, 2008 $ 4,320 $ 408,434 $ (408,195) $ 4,559
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 2009, 2008, and 2007 were
$53.5 million, $53.9 million, and $50.2 million, respectively.
Stock-based compensation. The Company recognizes 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 Accounting Standards Codification (“ASC”)
740-10, “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. ASC 740-10 also 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 and 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. See Note F.
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”). The Company computes and reports 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 2009, 2008, and 2007 there were 19,800, 583,000, and 1,277,000 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.