Overstock.com 2004 Annual Report Download - page 75

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Fulfillment partner revenue is reduced by the impact of estimated returns, chargebacks and coupons redeemed by customers and other discounts to obtain
such sales.
Total revenue is recorded net of estimated returns, coupons and other discounts. Our returns policy for all products other than those sold in our
Electronics and Computers department provides for a $4.95 restocking fee and the provision that we will not accept product returns initiated more than twenty
days after the shipment date. We charge a 15% restocking fee (instead of the $4.95 restocking fee) on all items returned for non-defective reasons from the
Electronics and Computers department.
Cost of goods sold
Cost of goods sold include product costs, warehousing costs, inbound and outbound shipping costs, handling and fulfillment costs, customer service costs
and credit card fees, and are recorded in the same period in which related revenues have been recorded. Fulfillment costs include warehouse handling labor
costs, fixed warehouse costs, credit card fees and customer service costs. For the years ended December 31, 2002, 2003 and 2004, fulfillment costs totaled
$9,373, $20,302 and $34,278, respectively.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using
enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be ultimately realized. Income tax expense (benefit) is the tax payable (receivable) for the period and the
change during the period in the deferred tax assets and liabilities.
Stock-based compensation
The Company measures compensation expense to employees for its equity incentive plan using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and provides pro forma disclosures of net income as if the fair value
based method prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, had been applied
(Note 14). The following table provides a
F-12