Petsmart 2014 Annual Report Download - page 83

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Table of Contents
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
allowances at February 2, 2014, and February 3, 2013, were principally to offset certain deferred income tax assets for net
operating loss carryforwards.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and
presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all
relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of
these matters will be consistent with what is reflected in the historical income tax provisions and accruals.
We operate in multiple tax jurisdictions and could be subject to audit in any of these jurisdictions. These audits can
involve complex issues that may require an extended period of time to resolve and may cover multiple years. To the extent we
prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our
effective income tax rate in a given fiscal period could be materially affected. An unfavorable tax settlement would require
use of our cash and could result in an increase in our effective income tax rate in the period of resolution. A favorable tax
settlement could result in a reduction in our effective income tax rate in the period of resolution.
At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our quarterly earnings.
The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which
those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period
in which the change occurs.
Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we
may be exposed to losses or gains that could be material.
Other Current Liabilities
Other current liabilities consisted of the following (in thousands):
February 2, 2014 February 3, 2013
Accrued income and sales tax $ 29,847 $ 72,435
Non-trade accounts payable 46,776 47,714
Other(1) 153,709 124,287
$ 230,332 $ 244,436
________
(1) There were no other individual items within other current liabilities greater than 5% of total current liabilities.
Revenue Recognition
Revenue is recognized net of applicable sales tax in the Consolidated Statements of Income and Comprehensive Income.
We record the sales tax liability in other current liabilities in the Consolidated Balance Sheets. We recognize revenue for store
merchandise sales when the customer receives and pays for the merchandise at the register. We recognize revenue from
professional grooming, boarding, and dog training when the services are performed. Internet sales are recognized at the time
that the customer receives the product. We defer revenue and the related product costs for shipments that are in transit to the
customer. Customers typically receive goods within a few days of shipment. Such amounts were immaterial as of February 2,
2014, and February 3, 2013. Amounts related to shipping and handling that are billed to customers are reflected in
merchandise sales, and the related costs are reflected in cost of merchandise sales.
We record deferred revenue for the sale of gift cards and recognize this revenue in net sales when cards are redeemed.
Gift card breakage income is recognized over two years based upon historical redemption patterns and represents the balance
of gift cards for which we believe the likelihood of redemption by the customer is remote. We recognized $3.0 million, $2.0
million, and $1.8 million of gift card breakage income during 2013, 2012, and 2011, respectively. Gift card breakage is
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