Overstock.com 2013 Annual Report Download - page 80

Table of Contents
as revenue on a straight-line basis over the remaining life of the credit card relationship which runs through April 2015. Credit card usage fees are recognized
as revenues as actual credit card usage occurs. Revenues from new account and credit card usage fees were less than 1% of total net revenues for all periods
presented.
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Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O
membership fees as deferred revenue and we recognize it ratably over the membership period. We record Club O reward dollars earned from purchases as
deferred revenue at the time they are earned and we recognize it as revenue upon redemption. If reward dollars are not redeemed, we recognize other income upon
expiration. In addition, we sell gift cards and record related deferred revenue at the time of the sale. We sell gift cards without expiration dates and we recognize
revenue from a gift card upon redemption of the gift card. If a gift card is not redeemed, we recognize other income when the likelihood of its redemption
becomes remote based on our historical redemption experience. We consider the likelihood of redemption to be remote after 36 months.
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We inspect returned items when they arrive at our processing facility. We refund the full cost of the merchandise returned and all original shipping
charges if the returned item is defective or we or our fulfillment partners have made an error, such as shipping the wrong product.
If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery,
for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. However, we reduce refunds
for returns initiated more than 30 days after delivery or that are received at our returns processing facility more than 45 days after initial delivery.
If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and actual
return shipping fees.
Revenue is recorded net of estimated returns. We record an allowance for returns based on current period revenues and historical returns experience.
We analyze actual historical returns, current 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.
The allowance for returns was $13.2 million and $10.6 million at December 31, 2013 and 2012 respectively.
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Revenue is recorded net of 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 $94,000 and $182,000 at December 31, 2013 and 2012, respectively.
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Cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs and
credit card fees, and is recorded in the same period in which related revenues have been recorded. Cost of goods sold, including product cost and other costs
and fulfillment and related costs are as follows (in thousands):
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Total revenue, net $1,304,217
100%
$1,099,289
100%
$1,054,277
100%
Cost of goods sold
Product costs and other cost of goods sold 999,519
77%
848,842
77%
821,739
78%
Fulfillment and related costs 57,038
4%
52,017
5%
53,450
5%
Total cost of goods sold 1,056,557
81%
900,859
82%
875,189
83%
Gross profit $247,660
19%
$198,430
18%
$179,088
17%
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