Foot Locker 2014 Annual Report Download - page 63

FOOT LOCKER, INC.
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 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 fiscal year end for the Company is the Saturday closest to the last day in January. Fiscal year 2014 represents
the 52 weeks ending January 31, 2015. Fiscal years 2013 and 2012 represent the 52 week period ending
February 1, 2014, and the 53 week period ending February 2, 2013, 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, referred to as breakage. 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 unredeemed gift cards are recorded as a current liability. Gift card breakage was
$5 million for 2014, $4 million for 2013, and $3 million for 2012.
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 any 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 are 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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