Urban Outfitters 2010 Annual Report Download - page 28

Bloomingdale’s, Nordstrom, Lord & Taylor, Belk, Urban Outfitters and our own Free People stores.
Free People wholesale sales accounted for approximately 4.9% of consolidated net sales for fiscal
2010.
The Leifsdottir wholesale division was established in fiscal 2009. Leifsdottir designs, develops
and markets sophisticated women’s contemporary apparel including dresses, tops and bottoms.
Leifsdottir is sold through luxury department stores including Bloomingdale’s, Nordstrom, Neiman
Marcus and Bergdorf Goodman, select specialty stores and our own Anthropologie stores. Leifsdottir
wholesale sales accounted for less than 1% of total consolidated net sales for fiscal 2010.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. These generally accepted accounting principles
require management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of net sales and expenses during the reporting period.
Our senior management has reviewed the critical accounting policies and estimates with our audit
committee. Our significant accounting policies are described in Note 2 of our consolidated financial
statements, “Summary of Significant Accounting Policies.” We believe that the following discussion
addresses our critical accounting policies, which are those that are most important to the portrayal of
our financial condition and results of operations and require management’s most difficult, subjective
and complex judgments, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain. If actual results were to differ significantly from estimates made, the reported
results could be materially affected. We are not currently aware of any reasonably likely events or
circumstances that would cause our actual results to be materially different from our estimates.
Revenue Recognition
Revenue is recognized at the point-of-sale for retail store sales or when merchandise is shipped to
customers for wholesale and direct-to-consumer sales, net of estimated customer returns. Revenue is
recognized at the completion of a job or service for landscape sales. Revenue is presented on a net
basis and does not include any tax assessed by a governmental or municipal authority. Payment for
merchandise at our stores and through our direct-to-consumer business is by cash, check, credit card,
debit card or gift card. Therefore, our need to collect outstanding accounts receivable for our retail and
direct-to-consumer business is negligible and mainly results from returned checks or unauthorized
credit card transactions. We maintain an allowance for doubtful accounts for our wholesale and
landscape service accounts receivable, which management reviews on a regular basis and believes is
sufficient to cover potential credit losses and billing adjustments. Deposits for custom orders are
recorded as a liability and recognized as a sale upon delivery of the merchandise to the customer.
These custom orders, typically for upholstered furniture, are not material. Deposits for landscape
services are recorded as a liability and recognized as a sale upon completion of service. Landscape
services and related deposits are not material.
We account for a gift card transaction by recording a liability at the time the gift card is issued to
the customer in exchange for consideration from the customer. A liability is established and remains
on our books until the card is redeemed by the customer at which time we record the redemption of the
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