Supercuts 2008 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
during fiscal years 2008, 2007, and 2006, respectively, and are included within general and administrative expenses. Any amounts billed to the
franchisee for shipping and handling are included in product revenues within the Consolidated Statement of Operations.
Advertising:
Advertising costs, including salon collateral material, are expensed as incurred. Net advertising costs expensed were $71.4, $69.2, and
$61.5 million in fiscal years 2008, 2007, and 2006, respectively. The Company participates in cooperative advertising programs under which the
vendor reimburses the Company for costs related to advertising for its products. The Company records such reimbursements as a reduction of
advertising expense when the expense is incurred. During fiscal years 2008, 2007, and 2006, no amounts were received in excess of the
Company's related expense.
Advertising Funds:
Franchisees and certain company-owned salons are required to contribute a percentage of sales to various advertising funds. The Company
administers the advertising funds at the directive of or subject to input from the franchise community. Accordingly, amounts collected and spent
by the advertising funds are not reflected as revenues and expenditures of the Company. Assets of the advertising funds administered by the
Company, along with an offsetting obligation to spend such assets, are recorded in the Consolidated Balance Sheet.
Preopening Expenses:
Non-capital expenditures such as payroll, training costs and promotion incurred prior to the opening of a new location are expensed as
incurred.
Sales Taxes:
Sales taxes are recorded on a net basis (rather than as both revenue and an expense) within the Company's Consolidated Statement of
Operations.
Income Taxes:
Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the
Consolidated Financial Statements or income tax returns. Deferred income tax assets and liabilities are determined based on the differences
between the financial statement and tax basis of assets and liabilities using currently enacted tax rates in effect for the years in which the
differences are expected to reverse. Realization of deferred tax assets is ultimately dependent upon future taxable income. Inherent in the
measurement of deferred balances are certain judgments and interpretations of tax laws and published guidance with respect to the Company's
operations. Income tax expense is primarily the current tax payable for the period and the change during the period in certain deferred tax assets
and liabilities.
Net Income Per Share:
The Company's basic earnings per share is calculated as net income divided by weighted average common shares outstanding, excluding
unvested outstanding restricted stock awards and restricted stock units. The Company's dilutive earnings per share is calculated as net income
divided by weighted
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