Foot Locker 2010 Annual Report Download - page 56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Foot Locker, Inc. and its domestic and
international subsidiaries (the ‘‘Company’’), all of which are wholly owned. All significant intercompany amounts
have been eliminated. The preparation of financial statements in conformity with U.S. generally accepted
accounting principles (‘‘GAAP’’) requires management to make estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may
differ from those estimates.
Reporting Year
The reporting period for the Company is the Saturday closest to the last day in January. Fiscal years 2010,
2009, and 2008 represent the 52 week periods ending January 29, 2011, January 30, 2010, and January 31, 2009,
respectively. References to years in this annual report relate to fiscal years rather than calendar years.
Revenue Recognition
Revenue from retail stores is recognized at the point of sale when the product is delivered to customers.
Internet and catalog sales revenue is recognized upon estimated receipt by the customer. Sales include shipping
and handling fees for all periods presented. Sales include merchandise, net of returns, and exclude taxes. The
Company provides for estimated returns based on return history and sales levels. Revenue from layaway sales is
recognized when the customer receives the product, rather than when the initial deposit is paid.
Gift Cards
The Company sells gift cards to its customers, which do not have expiration dates. Revenue from gift card
sales is recorded when the gift cards are redeemed or when the likelihood of the gift card being redeemed by the
customer is remote and there is no legal obligation to remit the value of unredeemed gift cards to the relevant
jurisdictions. The Company has determined its gift card breakage rate based upon historical redemption patterns.
Historical experience indicates that after 12 months the likelihood of redemption is deemed to be remote. Gift
card breakage income is included in selling, general and administrative expenses and totaled $2 million,
$4 million, and $5 million in 2010, 2009, and 2008, respectively. Unredeemed gift cards are recorded as a current
liability.
Statement of Cash Flows
The Company has selected to present the operations of the discontinued businesses as one line in the
Consolidated Statements of Cash Flows. For all the periods presented this caption includes only operating
activities.
Store Pre-Opening and Closing Costs
Store pre-opening costs are charged to expense as incurred. In the event a store is closed before its lease
has expired, the estimated post-closing lease exit costs, less the sublease rental income, is provided for once the
store ceases to be used.
Advertising Costs and Sales Promotion
Advertising and sales promotion costs are expensed at the time the advertising or promotion takes place,
net of reimbursements for cooperative advertising. Advertising expenses also include advertising costs as
required by some of the Company’s mall-based leases. Cooperative advertising reimbursements earned for the
launch and promotion of certain products agreed upon with vendors is recorded in the same period as the
associated expenses are incurred. Reimbursement received in excess of expenses incurred related to specific,
incremental, and identifiable advertising costs, is accounted for as a reduction to the cost of merchandise, which
is reflected in cost of sales as the merchandise is sold.
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