Barnes and Noble 2011 Annual Report Download - page 38

that refl ected management’s forecasts and discount rates
that included risk adjustments consistent with the current
market conditions. Based on the results of the Company’s
step one testing, the fair values of the Barnes & Noble
Retail, Barnes & Noble College and B&N.com reporting
units exceeded their carrying values; therefore, the second
step of the impairment test was not required to be per-
formed and no goodwill impairment was recognized. The
Company has noted no subsequent indicators of impair-
ment. The Company tests unamortizable intangible assets
by comparing the fair value and the carrying value of such
assets. The Company also completed its annual impairment
tests for its other unamortizable intangible assets by com-
paring the estimated fair value to the carrying value of such
assets and determined that no impairment was necessary.
Changes in market conditions, among other factors, could
have a material impact on these estimates.
Deferred Charges
Costs incurred to obtain long-term fi nancing are amortized
over the terms of the respective debt agreements using the
straight-line method, which approximates the interest
method. Unamortized costs included in other noncurrent
assets as of April 30, 2011 and May 1, 2010 were $26,525
and $32,428, respectively. Amortization expense included
in interest and amortization of deferred fi nancing fees was
$16,087, $5,925, $137 and $547 during fi scal 2011, fi scal
2010, the transition period and fi scal 2008, respectively.
Revenue Recognition
Revenue from sales of the Company’s products is recog-
nized at the time of sale, other than those with multiple
elements. The Company accrues for estimated sales returns
in the period in which the related revenue is recognized
based on historical experience and industry standards.
Sales taxes collected from retail customers are excluded
from reported revenues. All of the Company’s sales are
recognized as revenue on a “net” basis, including sales
in connection with any periodic promotions off ered to
customers. The Company does not treat any promotional
off ers as expenses.
In accordance with ASC 605-25, Revenue Recognition,
Multiple Element Arrangements and Accounting Standards
Updates (ASU) 2009-13 and 2009-14, for multiple-
element arrangements that involve tangible products that
contain software that is essential to the tangible product’s
functionality, undelivered software elements that relate
to the tangible product’s essential software and other
separable elements, the Company allocates revenue to
all deliverables using the relative selling-price method.
Under this method, revenue is allocated at the time of
sale to all deliverables based on their relative selling price
using a specifi c hierarchy. The hierarchy is as follows:
vendor-specifi c objective evidence, third-party evidence
of selling price, or best estimate of selling price. NOOK™
eBook Reader revenue (which includes revenue from the
Company’s NOOK 1st Edition™, NOOK Wi-Fi 1st Edition™,
NOOK Color™ and The All-New NOOK™ devices) is recog-
nized at the segment point of sale.
The Company includes post-service customer sup-
port (PCS) in the form of software updates and potential
increased functionality on a when-and-if-available basis,
as well as wireless access and wireless connectivity with the
purchase of NOOK™ from the Company. Using the rela-
tive selling price described above, the Company allocates
revenue based on the best estimate of selling price for
the deliverables as no vendor-specifi c objective evidence
or third-party evidence exists for any of the elements.
Revenue allocated to NOOK™ and the software essential to
its functionality is recognized at the time of sale, provided
all other conditions for revenue recognition are met.
Revenue allocated to the PCS and the wireless access is
deferred and recognized on a straight-line basis over the
2-year estimated life of NOOK™.
The Company also pays certain vendors who distribute
NOOK™ a commission on the content sales sold through
that device. The Company accounts for these transactions
as a reduction in the sales price of the NOOK™ based on
historical trends of content sales and a liability is estab-
lished for the estimated commission expected to be paid
over the life of the product. The Company recognizes
revenue of the content at the point of sale of the content.
The Company records revenue from sales of digital content,
sales of third-party extended warranties, service contracts
and other products, for which the Company is not obligated
to perform, and for which the Company does not meet the
criteria for gross revenue recognition under ASC 605-45-
45, Reporting Revenue Gross as a Principal versus Net as an
Agent, on a net basis. All other revenue is recognized on a
gross basis.
The Barnes & Noble Member Program off ers members
greater discounts and other benefi ts for products and
services, as well as exclusive off ers and promotions via
e-mail or direct mail for an annual fee of $25.00, which is
non-refundable after the fi rst 30 days. Revenue is recog-
nized over the twelve-month period based upon historical
spending patterns for Barnes & Noble Members.
36 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued