Kohl's 2009 Annual Report Download - page 53

Table of Contents
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
 

The following table illustrates the primary costs classified in Cost of Merchandise Sold and Selling, General and Administrative Expenses:



• Total cost of products sold including product development costs, net of
vendor payments other than reimbursement of specific, incremental and
identifiable costs
• Inventory shrink
• Markdowns
• Freight expenses associated with moving merchandise from our vendors to
our distribution centers
• Shipping and handling expenses of e-commerce sales
• Terms cash discount
• Compensation and benefit costs including:
• Stores
• Corporate headquarters, including buying and merchandising
• Distribution centers
• Occupancy and operating costs of our retail, distribution and
corporate facilities
• Net revenues from the Kohl’s credit card agreement with JPMorgan Chase
• Freight expenses associated with moving merchandise from our distribution
centers to our retail stores, and among distribution and retail facilities
• Advertising expenses, offset by vendor payments for reimbursement of
specific, incremental and identifiable costs
• Other administrative costs
The classification of these expenses varies across the retail industry.

We receive consideration for a variety of vendor-sponsored programs, such as markdown allowances, volume rebates and promotion and advertising
support. The vendor consideration is recorded either as a reduction of inventory costs or Selling, General and Administrative (“SG&A”) expenses based on the
application of Accounting Standards Codification (“ASC”) No. 605, Subtopic 50, “Customer Payments and Incentives.” Promotional and advertising
allowances are intended to offset our advertising costs to promote vendors’ merchandise. Markdown allowances and volume rebates are recorded as a reduction
of inventory costs.

Advertising costs, which include primarily television and radio broadcast, direct mail, and newspaper circulars, are expensed when the advertisement is
first seen. Advertising costs, net of related vendor allowances, were as follows:
  

Gross advertising costs  $1,037 $981
Vendor allowances  147 142
Net advertising costs  $ 890 $ 839
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