Urban Outfitters 2009 Annual Report Download - page 59

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URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company accounts for a gift card transaction by recording a liability at the time the gift card
is issued to the customer in exchange for consideration from the customer. A liability is established
and remains on the Company’s books until the card is redeemed by the customer, at which time the
Company records the redemption of the card for merchandise as a sale or when it is determined the
likelihood of redemption is remote. The Company determines the probability of the gift cards being
redeemed to be remote based on historical redemption patterns. Revenues attributable to gift card
liabilities relieved after the likelihood of redemption becomes remote are included in sales and are not
material. The Company’s gift cards do not expire.
Sales Return Reserve
The Company records a reserve for estimated product returns where the sale has occurred during
the period reported, but the return is likely to occur subsequent to the period reported and may
otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on the
Company’s most recent historical return trends. If the actual return rate or experience is materially
higher than the Company’s estimate, additional sales returns would be recorded in the future. The
activity of the sales returns reserve for the years ended January 31, 2009, 2008 and 2007 is as follows:
Balance at
beginning of
year Additions Deductions
Balance at
end of
year
Year ended January 31, 2009 ..................... $6,776 $28,408 $(27,637) $7,547
Year ended January 31, 2008 ..................... $8,916 $35,952 $(38,092) $6,776
Year ended January 31, 2007 ..................... $6,390 $29,376 $(26,850) $8,916
Cost of Sales, Including Certain Buying, Distribution and Occupancy Costs
Cost of sales, including certain buying, distribution and occupancy costs includes the following:
the cost of merchandise; merchandise markdowns; obsolescence and shrink; store occupancy costs
including rent and depreciation; customer shipping expense for direct-to-consumer orders; in-bound
and outbound freight; U.S. Customs related taxes and duties; inventory acquisition and purchasing
costs; warehousing and handling costs and other inventory acquisition related costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses includes expenses such as (i) direct selling and
selling supervisory expenses; (ii) various corporate expenses such as information systems, finance,
loss prevention, talent acquisition, and executive management expenses; and (iii) other associated
general expenses.
Shipping and Handling Fees and Costs
The Company includes shipping and handling revenues in net sales and shipping and handling
costs in cost of sales. The Company’s shipping and handling revenues consist of amounts billed to
customers for shipping and handling merchandise. Shipping and handling costs include shipping
supplies, related labor costs and third-party shipping costs.
F-11