Overstock.com 2011 Annual Report Download - page 112

Download and view the complete annual report

Please find page 112 of the 2011 Overstock.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 155

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACCOUNTING POLICIES (Continued)
economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting
period.
During the three months ended December 31, 2009, we had a change in estimate for our sales returns allowance that reduced the allowance by
approximately $3.0 million from the prior quarter-end balance and $3.2 million from the prior year-end balance that was recorded in accordance with ASC
250 "Accounting Changes and Error Corrections" on a prospective basis. The change in estimate for our sales returns allowance had the following impact on
our financial results for the three and twelve months ended December 31, 2009 (amounts in thousands, except per share data):
Three months ended
December 31, 2009 Twelve months ended
December 31, 2009
($ Change)
($ Change)
Revenue, net $ 2,995 $ 3,208
Gross profit 752 805
Income from continuing operations before income taxes 752 805
Net income 752 805
Net income attributable to common shares—basic $ 0.04 $ 0.04
Net income attributable to common shares—diluted $ 0.04 $ 0.03
The reasons for the change in estimate in the fourth quarter of 2009 were as follows. We made improvements to our information systems during 2008
and 2009 that enabled enhanced reporting and analysis of our returns data used in the estimation process. In early 2009, we implemented initiatives to reduce
overall return rates in several of our product categories. In September 2009, we entered into a new master supplier agreement with our fulfillment partners that
provided financial incentives for suppliers to reduce returns. These initiatives resulted in a sustained decrease in our product return trends resulting in the
change in estimate of sales returns allowance during the three months ended December 31, 2009.
Although we believe that our estimates, assumptions, and judgments are reasonable, actual results have historically differed from our estimates. Based on
our actual returns experience through December 31, 2011, had our estimated returns equaled our actual returns, our net income would have decreased
approximately $805,000 for the year ended December 31, 2009. Based on the improvements and initiatives discussed above, we believe that our estimates,
assumptions and judgments have improved and our actual product returns have not differed materially from our estimates at December 31, 2010 and during
2011.
The allowance for returns was $10.9 million and $11.5 million at December 31, 2011 and 2010, respectively.
Credit card chargeback allowance
Revenue is recorded net of estimated credit card chargebacks. We maintain an allowance for credit card chargebacks based on current period revenues
and historical chargeback experience. The allowance for chargebacks was $187,000 and $125,000 at December 31, 2011 and 2010, respectively.
F-16