Lowe's 2012 Annual Report Download - page 54

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The liability for extended protection plan claims incurred is included in other current liabilities on the consolidated balance
sheets. Changes in the liability for extended protection plan claims are summarized as follows:
(In millions) 2012 2011
Liability for extended protection plan claims, beginning of year .............................. $ 21 $ 20
Accrual for claims incurred ....................................................................................... 102 90
Claim payments ......................................................................................................... (103) (89)
Liability for extended protection plan claims, end of year ........................................ $ 20 $ 21
Cost of Sales and Selling, General and Administrative Expenses - The following lists the primary costs classified in
each major expense category:
Cost of Sales Selling, General and Administrative
 Total cost of products sold, including:
- Purchase costs, net of vendor funds;
- Freight expenses associated with moving
merchandise inventories from vendors to
retail stores;
- Costs associated with operating the
Company’s distribution network, including
payroll and benefit costs and occupancy
costs;
 Costs of installation services provided;
 Costs associated with delivery of products directl
y
from vendors to customers by third parties;
 Costs associated with inventory shrinkage and
obsolescence.
 Payroll and benefit costs for retail and corporate
employees;
 Occupancy costs of retail and corporate facilities;
 Advertising;
 Costs associated with delivery of products fro
m
stores and distribution centers to customers;
 Third-party, in-store service costs;
 Tender costs, including bank charges, costs
associated with credit card interchange fees an
d
amounts associated with accepting the Company’s
proprietary credit cards;
 Costs associated with self-insured plans, an
d
premium costs for stop-loss coverage and fully
insured plans;
 Long-lived asset impairment losses and gains/losses
on disposal of assets;
 Other administrative costs, such as supplies, an
d
travel and entertainment.
Advertising - Costs associated with advertising are charged to expense as incurred. Advertising expenses were $809
million, $803 million and $790 million in 2012, 2011 and 2010, respectively.
Shipping and Handling Costs - The Company includes shipping and handling costs relating to the delivery of products
directly from vendors to customers by third parties in cost of sales. Shipping and handling costs, which include third-party
delivery costs, salaries, and vehicle operations expenses relating to the delivery of products from stores and distribution
centers to customers, are classified as SG&A expense. Shipping and handling costs included in SG&A expense were $457
million, $461 million and $431 million in 2012, 2011 and 2010, respectively.
Store Opening Costs - Costs of opening new or relocated retail stores, which include payroll and supply costs incurred
prior to store opening and grand opening advertising costs, are charged to expense as incurred.
Comprehensive Income - The Company reports comprehensive income in its consolidated statements of comprehensive
income and consolidated statements of shareholders’ equity. Comprehensive income represents changes in shareholders'
equity from non-owner sources and is comprised primarily of net earnings plus or minus unrealized gains or losses on
available-for-sale securities, as well as foreign currency translation adjustments. Net unrealized gains, net of tax, on
available-for-sale securities classified in accumulated other comprehensive income on the consolidated balance sheets were
insignificant at February 1, 2013 and February 3, 2012. Net foreign currency translation gains, net of tax, classified in
accumulated other comprehensive income were $51 million and $45 million at February 1, 2013 and February 3, 2012,
respectively. The reclassification adjustments for realized gains/losses included in net earnings were insignificant during
2012, 2011 and 2010.