Best Buy 2005 Annual Report Download - page 63

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Effect if Actual Results Differ from
Description Judgments and Uncertainties Assumptions
Revenue Recognition
See Note 1, Summary of Significant Our revenue recognition accounting We have not made any material changes
Accounting Policies, to the Notes to methodology contains uncertainties in the accounting methodology used to
Consolidated Financial Statements, because management must apply judgment recognize revenue during the past three
included in Item 8, Financial Statements in estimating the number of points fiscal years.
and Supplementary Data, of this Annual expected to be redeemed by members of We do not believe there is a reasonable
Report on Form 10-K, for a complete our customer loyalty program and rebate likelihood that there will be a material
discussion of our revenue recognition offers that will be redeemed by customers. change in the future estimates we use to
policies. Our estimate of the number of points and recognize revenue. However, if actual
rebates that will be redeemed is based
Reward Zone, our customer loyalty results are not consistent with our
primarily on historical transaction
program, allows members to earn points estimates, we may be exposed to losses or
experience.
for each purchase completed at U.S. Best gains that could be material.
Buy stores. After earning the required A 10% change in the Reward Zone and
point total, members are awarded a rebate liabilities at February 26, 2005,
certificate that may be redeemed on future would have affected net earnings by
purchases. The value of points earned by approximately $3 million and $9 million,
members is recorded as a liability and a respectively, for the fiscal year ended
reduction of revenue based on the February 26, 2005.
percentage of points that are projected to
be redeemed.
From time to time, we offer customers
mail-in rebates valid for a refund of a
portion of the price paid for merchandise
or services. Rebates are recorded as a
reduction of revenue based on the
percentage of rebates that are projected to
be redeemed.
Long-Term Incentive Program
We offer a long-term incentive program At the end of each fiscal quarter, We have not made any material changes
for certain U.S. employees designed to management is required to estimate the in the accounting methodology used to
help us attract and retain employees and percentage of restricted stock that will vest establish our long-term incentive program
to better align employee interests with at the end of the three-year incentive liability since the program’s inception in
those of our shareholders. Under the terms period in order to determine the amount of the third quarter of fiscal 2004.
of the program, which began in November compensation expense to be recognized. We do not believe there is a reasonable
2003, eligible employees may receive a Management’s estimate for the percentage likelihood that there will be a material
mix of restricted stock and stock options of restricted stock that will vest contains change in the future estimates we use to
issued pursuant to existing shareholder- uncertainties because it is based on the calculate our long-term incentive program
approved plans. Shares of restricted stock projected performance of our stock liability. However, if actual results are not
vest at the end of a three-year incentive compared with the S&P 500 during the consistent with our estimates, we may be
period based on our total return to three-year incentive period. exposed to losses or gains that could be
shareholders compared with the total material.
return to shareholders of companies
comprising the Standard & Poor’s (S&P) A 10% difference in the percentage of
500. restricted stock that is projected to vest at
the end of the three-year incentive period
Effective with the adoption of SFAS No. as of February 26, 2005, would have
123(R), Share-Based Payment, which we affected net earnings by approximately
expect will occur for the first quarter of $4 million for the fiscal year ended
fiscal 2006, we will determine the fair February 26, 2005.
value of restricted stock and recognize the
fair value as compensation expense
ratably over the three-year vesting period.
47