Barnes and Noble 2008 Annual Report Download - page 26

Advertising Costs
The costs of advertising are expensed as incurred dur-
ing the year pursuant to Statement of Position 93-7,
Reporting on Advertising Costs. Advertising costs charged
to selling and administrative expenses were $28,772,
$27,158 and $27,335 during fi scal 2008, 2007 and 2006,
respectively.
The Company receives payments and credits from
vendors pursuant to co-operative advertising and other
programs, including payments for product placement
in stores, catalogs and online. In accordance with
Emerging Issues Task Force Issue 02-16, Accounting by
a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor, the Company classifi es certain
co-op advertising received as a reduction in costs of
sales and occupancy. The gross advertising expenses
noted above were completely off set by allowances
received from vendors and the excess allowances
received were recorded as a reduction of cost of goods
sold or inventory, as appropriate.
Closed Store Expenses
When the Company closes or relocates a store, the
Company charges unrecoverable costs to expense. Such
costs include the net book value of abandoned fi xtures
and leasehold improvements and, when a store is closed
prior to the expiration of the lease, a provision for future
lease obligations, net of expected sublease recover-
ies. Costs associated with store closings of $11,875,
$9,378 and $7,425 during fi scal 2008, 2007 and 2006,
respectively, are included in selling and administrative
expenses in the accompanying consolidated statements
of operations.
Net Earnings Per Common Share
Basic earnings per share is computed by dividing
income available to common shareholders by the
weighted-average number of common shares outstand-
ing. Diluted earnings per share refl ect, in periods in
which they have a dilutive eff ect, the impact of common
shares issuable upon exercise of the Company’s out-
standing stock options, common shares released from
restriction upon the vesting of the Company’s outstand-
ing restricted stock and the impact of common shares
issuable under the Company’s deferred compensation
plan. The Company has not excluded any shares from the
computation of diluted earnings per share.
Income Taxes
The provision for income taxes includes federal, state
and local income taxes currently payable and those
deferred because of temporary diff erences between the
fi nancial statement and tax bases of assets and liabili-
ties. The deferred tax assets and liabilities are measured
using the enacted tax rates and laws that are expected to
be in eff ect when the diff erences reverse. The Company
regularly reviews its deferred tax assets for recoverabil-
ity and establishes a valuation allowance, if determined
to be necessary.
Stock-Based Compensation
The calculation of share-based employee compensation
expense involves estimates that require management’s
judgment. These estimates include the fair value of each
of the stock option awards granted, which is estimated
on the date of grant using a Black-Scholes option pric-
ing model. There are two signifi cant inputs into the
Black-Scholes option pricing model: expected volatility
and expected term. The Company estimates expected
volatility based on traded option volatility of the
Company’s stock over a term equal to the expected term
of the option granted. The expected term of stock option
awards granted is derived from historical exercise
experience under the Company’s stock option plans and
represents the period of time that stock option awards
granted are expected to be outstanding. The assump-
tions used in calculating the fair value of share-based
payment awards represent management’s best esti-
mates, but these estimates involve inherent uncertain-
ties and the application of management’s judgment. As a
result, if factors change and the Company uses diff erent
assumptions, stock-based compensation expense could
be materially diff erent in the future. In addition, the
Company is required to estimate the expected forfei-
ture rate, and only recognize expense for those shares
expected to vest. If the Company’s actual forfeiture rate
is materially diff erent from its estimate, the stock-
based compensation expense could be signifi cantly
diff erent from what the Company has recorded in the
current period. See Note 3 to the Consolidated Financial
Statements for a further discussion on stock-based
compensation.
2008 Annual Report 25