CompUSA 2015 Annual Report Download - page 56

Table of Contents
Goodwill and Intangible Assets —Goodwillrepresentstheexcessofthecostofacquiredassetsoverthefairvalueofassetsacquired.TheCompanyperforms
aqualitativeassessmentofgoodwillandnon-amortizingintangiblestodeterminewhetheritismorelikelythannotthatthefairvalueofareportingunitisless
thanitscarryingamount.Ifthequalitativeassessmentshowsthatthefairvalueofthereportingunitexceedsitscarryingamount,thecompanyisnotrequired
tocompletetheannualtwostepgoodwillimpairmenttest.Ifaquantitativeanalysisisrequiredtobeperformedforgoodwill,thefairvalueofthereporting
unittowhichthegoodwillhasbeenassignedisdeterminedusingadiscountedcashflowmodel.Adiscountedcashflowmodelisalsousedtodeterminefair
valueofindefinite-livedintangiblesusingprojectedcashflowsoftheintangible.Unobservableinputsrelatedtothesediscountedcashflowmodelsinclude
projectedsalesgrowth,samestoresalesgrowth,grossmarginpercentages,newbusinessopportunities,workingcapitalrequirements,capitalexpendituresand
growthinselling,generalandadministrativeexpense.
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Income Taxes —TheCompanyaccountsforincometaxesusingtheliabilitymethod,underwhichdeferredtaxassetsandliabilitiesaredeterminedbasedon
thefuturetaxconsequencesattributabletodifferencesbetweenthefinancialreportingcarryingamountsofexistingassetsandliabilitiesandtheirrespective
taxbasesandtaxcreditcarryforwardsandnetoperatinglosscarryforwards.Deferredtaxassetsandliabilitiesaremeasuredusingtheenactedtaxratesthatare
expectedtobeineffectwhenthedifferencesareexpectedtoreverse.
TheCompanyassessesthelikelihoodthatdeferredtaxassetswillberecoveredfromfuturetaxableincome,andavaluationallowanceisestablishedwhen
necessarytoreducedeferredtaxassetstotheamountsmorelikelythannotexpectedtoberealized.
TheCompanyrecognizesandmeasuresuncertaintaxpositionsusingatwo‑stepapproach.Thefirststepistoevaluatethetaxpositiontakenorexpectedtobe
takenbydeterminingiftheweightofavailableevidenceindicatesthatitismorelikelythannotthatthetaxpositionwillbesustainedinanaudit,including
resolutionofanyrelatedappealsorlitigationprocesses.Thesecondstepistomeasurethetaxbenefitasthelargestamountthatismorethan50%likelytobe
realizeduponultimatesettlement.Significantjudgmentisrequiredtoevaluateuncertaintaxpositions.TheCompanyevaluatesitsuncertaintaxpositionsona
regularbasis. Itsevaluationsarebased onanumber offactors,includingchanges infactsandcircumstances, changesintaxlaw, correspondencewithtax
authorities during the course of audit and effective settlement of audit issues. The Company’s policy is to include interest and penalties related to
unrecognizedtaxbenefitsasincometaxexpenseintheconsolidatedstatementsofoperations.
Revenue Recognition and Accounts Receivable —TheCompanyrecognizessalesofproducts,includingshippingrevenue,whenpersuasiveevidenceofan
orderarrangementexists,deliveryhasoccurred,thesalespriceisfixedordeterminableandcollectibilityisreasonablyassured.Generally,thesecriteriaare
metatthetimetheproductisreceivedbythecustomerswhentitleandriskoflosshavetransferredexceptinourIndustrialProductssegmentwheretitleand
riskpassattimeofshipment.Allowancesforestimatedsubsequentcustomerreturns,rebatesandsalesincentivesareprovidedwhenrevenuesarerecorded.
Revenues exclude sales tax collected. The Company evaluates collectability of accounts receivable based on numerous factors, including past transaction
historywithcustomersandtheircreditratingandprovidesareserveforaccountsthatarepotentiallyuncollectible.Tradereceivablesaregenerallywrittenoff
onceallcollectioneffortshavebeenexhausted.Accountsreceivableareshownintheconsolidatedbalancesheetsnetofallowancesfordoubtfulcollections
andsubsequentcustomerreturns.
Shipping and Handling Costs —TheCompanyrecognizesshippingandhandlingcostsincostofsales.
Advertising Costs — Expenditures for internet, television, local radio and newspaper advertising are expensed in the period the advertising takes place.
Catalogpreparation,printingandpostageexpendituresareamortizedovertheperiodofcatalogdistributionduringwhichthebenefitsareexpected,generally
onetofourmonths.
Netadvertisingexpenseswere$74.4million,$68.1millionand$60.1millionduring2015,2014and2013,respectively,andareincludedintheaccompanying
consolidatedstatementsofoperations.Ofthepreviouslymentionedamounts,NATGoperationsnetadvertisingexpensestotaled$7.5million,$10.7million
and$14.1millionduring2015,2014and2013,respectively.TheCompanyutilizesadvertisingprogramstosupportvendors,includingcatalogs,internetand
magazine advertising, and receives payments and credits from vendors, including consideration pursuant to volume incentive programs and cooperative
marketingprograms.TheCompanyaccountsforconsiderationfromvendorsasareductionofcostofsalesunlesscertainconditionsaremetshowingthatthe
fundsareusedforspecific,incremental,identifiablecosts,inwhichcasetheconsiderationisaccountedforasareductionintherelatedexpensecategory,such
as advertising expense. Theamount of vendor consideration recorded asa reduction of selling, general andadministrative expenses totaled $20.2 million,
$38.8millionand$45.9millionduring2015,2014and2013,respectively.Ofthepreviouslymentioned amounts,NATGoperationsvendorconsideration
recordedasareductionofselling,generalandadministrativeexpensestotaled$12.1million,$24.9millionand$28.3million,respectively.
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