DSW 2015 Annual Report Download - page 54

Table of Contents
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receivable in Town Shoes are required to be tested for impairment if there is determined to be an other than temporary loss in value.
The Company records estimates for certain health and welfare, workers' compensation and casualty insurance costs that are self-
insured programs. Self-insurance reserves include actuarial estimates of both claims filed, carried at their expected ultimate settlement value, and claims
incurred but not yet reported. The liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. Estimates for health and
welfare, workers’ compensation and general liability are calculated utilizing claims development estimates based on historical experience and other factors.
The Company has purchased stop loss insurance to limit its exposure on a per person basis for health and welfare and on a per claim basis for workers'
compensation and general liability, as well as on an aggregate annual basis. The self-insurance reserves were $4.2 million and $4.0 million as of January 30,
2016 and January 31, 2015, respectively.
 The Company maintains a customer loyalty program for DSW in which program members earn reward certificates that result in
discounts on future purchases. Upon reaching the target-earned threshold, the members receive reward certificates for these discounts, which expire three
months after being issued. The Company accrues the anticipated redemptions of the discount earned at the time of the initial purchase. To estimate these
costs, the Company makes assumptions related to customer purchase levels and redemption rates based on historical experience.
The Company is involved in various legal proceedings that are incidental to the conduct of its business. The Company
estimates the range of liability related to pending litigation where the amount of the range of loss can be estimated. The Company records its best estimate of
a loss when the loss is considered probable, including an estimate of legal fees to be incurred. When a liability is probable and there is a range of estimated
loss, the Company records an estimate of the amount of the liability related to the claim. See Note 16 for a discussion of legal proceedings.
Many of the Company’s operating leases contain predetermined fixed increases of the minimum rentals during the initial lease terms. For
these leases, the Company recognizes the related rental expense on a straight-line basis over the noncancelable terms of the lease. The Company records the
difference between the amounts charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the delivery of the lease
location by the lessor. Deferred rent is included in non-current liabilities.
 The Company receives cash allowances from landlords, which are deferred and amortized on a straight-line basis over
the noncancelable terms of the lease as a reduction of rent expense. Construction and tenant allowances are included in non-current liabilities.
 The Company records a reserve when a store or office facility is abandoned due to closure or relocation. Using its credit-
adjusted risk-free rate to present value the liability, the Company estimates future lease obligations based on remaining lease payments, estimated or actual
sublease payments and any other relevant factors. On a quarterly basis, the Company reassesses the reserve based on current market conditions. See Note 16
for a discussion of exit and disposal obligations.
 Accumulated other comprehensive loss is defined as the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. Fiscal 2015 includes foreign currency translation adjustments, as well as
unrealized net losses on available-for-sale securities.
 Non-operating income includes remeasurement effects of foreign currency, as well as realized capital gains and losses related to the
Company's investment portfolio.
 On April 30, 2014, the Company began to offer co-branded credit cards under a seven-year agreement with an issuing bank, which
allows members to earn points through purchases at DSW and anywhere that Visa is accepted. DSW provides marketing support for the co-branded credit card
program. The issuing bank is the sole owner of the credit card accounts.
The revenue under this agreement is recorded in net sales. The Company received an upfront signing bonus from the issuing bank, which is recognized on a
straight-line basis over the life of the relationship. The Company receives ongoing payments from the issuing bank for new accounts activated, as well as
payments for usage of the cards, which will be recognized over the life of the relationship on a cumulative catch-up basis.
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Source: DSW Inc., 10-K, March 24, 2016 Powered by Morningstar® Document Research℠
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