Sally Beauty Supply 2013 Annual Report Download - page 114

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2013, 2012 and 2011
These estimates are reviewed on a regular basis to ensure that the recorded liability is adequate. The
Company believes the amounts accrued at September 30, 2013 and 2012 are adequate.
Revenue Recognition
The Company recognizes sales revenue when a customer consummates a point-of-sale transaction at a
store. The cost of sales incentive programs, including customer and consumer coupons, is recognized as a
reduction of revenue at the time of sale. Taxes collected from customers and remitted to governmental
authorities are recorded on a net basis and are excluded from revenue. The Company also recognizes
revenue on merchandise shipped to customers when title and risk of loss pass to the customer (generally
upon shipment). Appropriate provisions for sales returns and cash discounts are made at the time the sales
are recognized. Sales returns and allowances averaged approximately 2.0% of net sales during each of the
past three fiscal years.
Cost of Products Sold and Distribution Expenses
Cost of products sold and distribution expenses include actual product costs, the cost of transportation to
the Company’s distribution centers, vendor rebates and allowances, inventory shrinkage and certain
shipping and handling costs, such as freight from the distribution centers to the stores and handling costs
incurred at the distribution centers. All other shipping and handling costs are included in selling, general
and administrative expenses when incurred.
Shipping and Handling
Shipping and handling costs (including freight and distribution expenses) related to delivery to customers
are included in selling, general and administrative expenses in our consolidated statements of earnings
when incurred and amounted to $48.5 million, $41.3 million and $41.2 million for the fiscal years 2013,
2012 and 2011, respectively.
Advertising Costs
Advertising costs relate mainly to print advertisements, digital marketing, trade shows and product
education for salon professionals. Advertising costs incurred in connection with print advertisements are
expensed the first time the advertisement is run. Other advertising costs are expensed when incurred.
Advertising costs of $83.9 million, $79.8 million and $70.9 million for the fiscal years 2013, 2012 and 2011,
respectively, are included in selling, general and administrative expenses in our consolidated statements of
earnings.
Vendor Rebates and Concessions
The Company deems a cash consideration received from a supplier to be a reduction of the cost of
products sold unless it is in exchange for an asset or service or a reimbursement of a specific, incremental,
identifiable cost incurred by the Company in selling the vendor’s products. The majority of cash
consideration received by the Company is considered to be a reduction of the cost of the related products
and is reflected in cost of products sold and distribution expenses in our consolidated statements of
earnings as the related products are sold. Any portion of such cash consideration received that is
attributable to inventory on hand is reflected as a reduction of inventory.
F-12