Express 2011 Annual Report Download - page 70

A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position
will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on
the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be
recognized.
The Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when the
Company’s judgment changes as a result of the evaluation of new information not previously available. Due to
the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially
different from the current estimate of the tax liabilities. These differences will be reflected as increases or
decreases to income tax expense and the effective tax rate in the period in which the new information becomes
available.
Interest and penalties related to unrecognized tax benefits are recognized within income tax expense in the
Consolidated Statements of Operations. Accrued interest and penalties are included within accrued expenses on
the Consolidated Balance Sheets.
The income tax liability was $28.8 million and $12.9 million as of January 28, 2012 and January 29, 2011,
respectively.
The Company may be subject to periodic audits by the Internal Revenue Service (“IRS”) and other taxing
authorities. These audits may challenge certain of our tax positions, such as the timing and amount of deductions
and allocation of taxable income to the various jurisdictions.
Self Insurance
The Company is generally self-insured for medical, workers’ compensation, and general liability benefits up to
certain stop-loss limits in the United States. Such costs are accrued based on known claims and an estimate of
incurred but not reported (“IBNR”) claims. IBNR claims are estimated using historical claim information and
actuarial estimates. The accrued liability for self insurance is included in accrued expenses on the Consolidated
Balance Sheets.
Foreign Currency Translation
The Canadian dollar is the functional currency for the Canadian business. Assets and liabilities denominated in
foreign currencies were translated into U.S. dollars (the reporting currency) at the exchange rate prevailing at the
balance sheet date. Revenues and expenses denominated in foreign currencies were translated into U.S. dollars at
the monthly average exchange rate for the period. Gains or losses resulting from foreign currency transactions
are included in other income, net whereas related translation adjustments are reported as an element of other
comprehensive income, both of which are included in the Consolidated Statements of Income and
Comprehensive Income.
Revenue Recognition
The Company recognizes sales at the time the customer takes possession of the merchandise which, for
e-commerce revenues, requires an estimate of shipments that have not yet been received by the customer. The
estimate of these shipments is based on shipping terms and historical delivery times. Amounts related to shipping
and handling revenues billed to customers in an e-commerce sale transaction are classified as net sales, and the
related shipping and handling costs are classified as cost of goods sold, buying and occupancy costs in the
Consolidated Statements of Income and Comprehensive Income. The Company’s shipping and handling
revenues were $15.8 million, $13.2 million, and $8.9 million in 2011, 2010, and 2009, respectively. Associate
discounts are classified as a reduction of net sales. Net sales exclude sales tax collected from customers and
remitted to governmental authorities.
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