Urban Outfitters 2012 Annual Report Download - page 29

Table of Contents
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 presentation of our financial condition and cash flows 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
channel is tendered 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 channel 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 card
for merchandise as a sale, or when we determine the likelihood of redemption is remote. We determine the probability of the gift cards being redeemed to be
remote based on historical redemption patterns. Revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are
included in sales and are not material. Our gift cards do not expire.
Sales Return Reserve
We record a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to
the period reported and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on our most recent historical
return trends. If the actual return rate or experience is materially higher than our estimate, additional sales returns would be adjusted in the future. As of
January 31, 2012 and 2011, reserves for estimated sales returns in-transit totaled $11.0 million and $11.4 million, representing 2.6% and 3.0% of total
liabilities, respectively.
Marketable Securities
All of our marketable securities as of January 31, 2012 and 2011, are classified available-for-sale and are carried at fair value, which approximates
amortized cost. Interest on these securities, as well as the amortization of discounts and premiums, is included in interest income in the Consolidated
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