Harris Teeter 2007 Annual Report Download - page 41

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RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Selling, General and Administrative Expenses
The major components of selling, general and administrative expenses in the retail supermarket segment
are (a) the costs associated with store operations, including store labor and training, fringe benefits and incentive
compensation, supplies and maintenance, regional and district management and store support, store rent and
other occupancy costs, property management and similar costs, (b) advertising costs, (c) shipping and handling
costs, excluding freight, warehousing and distribution costs, (d) merchandising and purchasing department
staffing, supplies and associated costs, (e) customer service and support, and (f) the costs of maintaining general
and administrative support functions, including, but not limited to, personnel administration, finance and
accounting, treasury, credit, information systems, marketing, and environmental, health and safety, based on
appropriate classification under generally accepted accounting principles.
The major components of selling, general and administrative expenses in the textile manufacturing
and distribution segment are (a) the costs of maintaining a sales force, including compensation, incentive
compensation, benefits, office and occupancy costs, travel and all other costs of the sales force, (b) shipping and
handling costs, excluding freight, (c) the costs of advertising, customer service, sales support and other similar
costs, and (d) the costs of maintaining general and administrative support functions, including, but not limited
to, personnel administration, finance and accounting, treasury, credit, information systems, training, marketing,
and environmental, health and safety, to the extent that such overhead activities are not allocable to indirect
manufacturing costs in cost of sales under generally accepted accounting principles.
The major components of selling, general and administrative expenses in the corporate segment are (a)
the costs associated with a portion of compensation and benefits of holding company employees, and (b) certain
other costs that are not related to the operating companies.
Advertising
Costs incurred to produce media advertising are expensed in the period in which the advertising first
takes place. All other advertising costs are also expensed when incurred. Cooperative advertising income
from vendors is recorded in the period in which the related expense is incurred and amounted to $1,635,000,
$1,745,000 and $1,464,000 in fiscal 2007, 2006 and 2005, respectively. Net advertising expenses of $24,486,000,
$23,311,000, and $22,906,000 were included in the Company’s results of operations for fiscal 2007, 2006 and
2005, respectively.
Foreign Currency
Assets and liabilities of foreign operations (if applicable) are translated at the current exchange rates as of
the end of the accounting period, and revenues and expenses are translated using average exchange rates. The
resulting translation adjustments are net of income taxes and accumulated as a component of other comprehensive
income in shareholders’ equity.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Tax credits are recorded
as a reduction of income taxes in the years in which they are generated. Deferred tax liabilities or assets at the
end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or
recovered. Accordingly, income tax expense will increase or decrease in the same period in which a change
in tax rates is enacted. A valuation allowance is established for deferred tax assets for which realization is not
reasonably assured.