Express 2013 Annual Report Download - page 34

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Table of Contents
 



We sell gift cards in our retail stores and through our
e-commerce website and third parties, which do not
expire or lose value over periods of inactivity. We
account for gift cards by recognizing a liability at the
time a gift card is sold. We recognize income from
gift cards when they are redeemed by the customer. In
addition, income on unredeemed gift cards is
recognized proportionally using a time based
attribution method from issuance of the gift card to
the time it can be determined that the likelihood of the
gift card being redeemed is remote. The gift card
breakage rate is based on historical redemption
patterns.
Our accounting methodology for calculating gift
card breakage contains uncertainties because it
requires management to make assumptions that
future gift card redemptions will follow the pattern
of previous redemptions. Our estimates for these
items are based primarily on historical transaction
experience.
We have not made any material changes in the
accounting methodology used to determine gift card
breakage over the past 3 years.
We have no reason to believe that there will be a
material change in the future estimates or
assumptions we use to measure gift card breakage.
However, if actual results are not consistent with
our estimates or assumptions, we may be exposed
to losses or gains that could be material.
A 100 basis point change in our gift card breakage
rate as of February 1, 2014 would not have had a
material impact on pre-tax income.

We recognize retail sales at the time the customer
takes possession of the merchandise. We reserve for
sales returns through estimates based on historical
experience and various other assumptions that
management believes to be reasonable.
Our accounting methodology for estimating our
returns reserve contains uncertainties because it
requires management to make assumptions that
merchandise returns in the future will follow the
pattern of returns in prior periods. Our estimates for
these items are based primarily on historical
transaction experience.
We have not made any material changes in the
accounting methodology used to determine returns
reserve over the past 3 years.
We have no reason to believe that there will be a
material change in the future estimates or
assumptions we use to measure our returns reserve.
However, if actual results are not consistent with
our estimates or assumptions, we may be exposed
to losses or gains that could be material.
A 100 basis point change in the rate of returns as of
February 1, 2014 would have not materially effect
pre-tax income.
34