Harris Teeter 2009 Annual Report Download - page 45

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RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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 Company also
includes the net profit of unconsolidated subsidiaries within selling, general and administrative expenses. The
net profit from non-consolidated subsidiaries included in selling, general and administrative expenses amounted
to $4,435,000 in fiscal 2009, $3,445,000 in fiscal 2008 and $1,386,000 in fiscal 2007.
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 $1,972,000,
$1,717,000 and $1,635,000 in fiscal 2009, 2008 and 2007, respectively. Net advertising expenses of $24,312,000,
$25,818,000, and $24,486,000 were included in the Company’s results of operations for fiscal 2009, 2008 and
2007, 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 settled or realized.
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 more likely
than not.
The Company adopted the provisions on accounting for uncertainty in income taxes as prescribed by ASC
Subtopic 740-10 on October 1, 2007. This standard clarifies the accounting for uncertainty in income taxes by
prescribing a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that
is required to be met before being recognized in the financial statements. ASC Subtopic 740-10 also provides
guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods,
disclosure and transition. The Company has elected to record interest expense related to unrecognized tax
benefits in interest expense. Penalties, if incurred, would be recorded as a component of income tax expense.