Express 2014 Annual Report Download - page 56

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 Income and Comprehensive Income. Accrued interest and penalties are included
within accrued expenses on the Consolidated Balance Sheets.
The income tax liability was $16.4 million and $19.2 million as of January 31, 2015 and February 1, 2014,
respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.
The Company may be subject to periodic audits by the Internal Revenue Service (“IRS”) and other taxing
authorities. These audits may challenge certain of the Company’s tax positions, such as the timing and amount of
deductions and allocation of taxable income to various jurisdictions.
Self Insurance
The Company is generally self-insured in the United States for medical, workers’ compensation, and general
liability benefits up to certain stop-loss limits. Such costs are accrued based on known claims and estimates 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 Company’s 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 applicable 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 expense (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. The Company may, in certain situations, designate certain
foreign currency denominated, long-term intercompany financing transactions as being of a long-term investment
nature and therefore record gains and losses on the transactions arising from changes in exchange rates as
translation adjustments.
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 recorded in net sales, and the
related shipping and handling costs are recorded in 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 $11.3 million, $14.5 million, and $17.4 million in 2014, 2013, and 2012, respectively. Associate
discounts are classified as a reduction of net sales. Net sales exclude sales tax collected from customers and
remitted to governmental authorities.
The Company also sells merchandise to multiple franchisees pursuant to different franchise agreements.
Revenues may consist of sales of product and/or royalties. Revenues from products sold to franchisees are
recorded at the time title transfers to the franchisees. Royalty revenue is based upon a percentage of the
franchisee’s net sales to third parties and is earned when such sales to third parties occur.
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