Dollar Tree 2012 Annual Report Download - page 37

Notes to Consolidated Financial Statements
Revenue Recognition
eCompanyrecognizessalesrevenueatthetimeasale
is made to its customer.
Taxes Collected
e Company reports taxes assessed by a governmental
authority that are directly imposed on revenue-producing
transactions(i.e.,salestax)onanet(excludedfrom
revenues)basis.
Cost of Sales
e Company includes the cost of merchandise, ware-
housing and distribution costs, and certain occupancy
costs in cost of sales.
Pre-Opening Costs
e Company expenses pre-opening costs for new,
expanded and relocated stores, as incurred.
Advertising Costs
e Company expenses advertising costs as they are
incurred and they are included in “selling, general
and administrative expenses” on the accompanying
consolidated statements of operations. Advertising costs
approximated$13.5million,$13.8millionand$11.1
millionfortheyearsendedFebruary2,2013,January28,
2012,andJanuary29,2011,respectively.
Income Taxes
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are
recognizedforthefuturetaxconsequencesattributableto
dierencesbetweennancialstatementcarryingamounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
incomeintheyearsinwhichthosetemporarydierences
areexpectedtoberecoveredorsettled.eeecton
deferred tax assets and liabilities of a change in tax rates
isrecognizedinincomeintheperiodthatincludesthe
enactment date of such change.
eCompanyrecognizesanancialstatement
benetforataxpositionifitdeterminesthatitismore
likely than not that the position will be sustained upon
examination.
e Company includes interest and penalties in
the provision for income tax expense and income taxes
payable. e Company does not provide for any penalties
associated with tax contingencies unless they are consid-
ered probable of assessment.
Stock-Based Compensation
eCompanyrecognizesallshare-basedpaymentsto
employees, including grants of employee stock options, in
thenancialstatementsbasedontheirfairvalues.Total
stock-basedcompensationexpensefor2012,2011and
2010was$34.9million,$31.0millionand$27.9million,
respectively.
eCompanyrecognizesexpenserelatedtothefair
valueofstockoptionsandrestrictedstockunits(RSUs)
over the requisite service period on a straight-line basis or
a shorter period based on the retirement eligibility of the
grantee. e fair value of stock option grants is estimated
on the date of grant using the Black-Scholes option
pricing model. e fair value of the RSUs is determined
usingtheclosingpriceoftheCompany’scommonstock
on the date of grant.
Net Income Per Share
Basic net income per share has been computed by
dividing net income by the weighted average number
of shares outstanding. Diluted net income per share
reflects the potential dilution that could occur assuming
the inclusion of dilutive potential shares and has been
computed by dividing net income by the weighted
average number of shares and dilutive potential shares
outstanding. Dilutive potential shares include all
outstanding stock options and unvested RSUs after
applying the treasury stock method.
Comprehensive Income
Intherstquarterof2012,theCompanyadopted
AccountingStandardsUpdate(“ASU”)No.2011-05,
“ComprehensiveIncome(Topic220):Presentationof
Comprehensive Income.” is update requires that the
total of comprehensive income, the components of net
income, and the components of other comprehensive
income be presented in either a single continuous
statement of comprehensive income or in two separate
but consecutive statements. is update does not change
what items are reported in other comprehensive income
ortherequirementtoreportreclassicationofitems
from other comprehensive income to net income.
2012AnnualReport35