LIMITED BRANDS INC by 0m63vv

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									Chapter 18- Revenue Recognition Note

LIMITED BRANDS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition
The Company recognizes sales upon customer receipt of the merchandise, which
for e-commerce and catalogue revenues reflects an estimate of shipments that have
not yet been received by the customer based on shipping terms and estimated
delivery times. The Company’s shipping and handling revenues are included in
Net Sales with the related costs included in Costs of Goods Sold, Buying and
Occupancy on the Consolidated Statements of Income. The Company also
provides a reserve for projected merchandise returns based on prior experience.
Net Sales exclude sales tax collected from customers.

The Company’s brands sell gift cards with no expiration dates to customers. The
Company does not charge administrative fees on unused gift cards. The Company
recognizes income from gift cards when they are redeemed by the customer. In
addition, the Company recognizes income on unredeemed gift cards when it can
determine that the likelihood of the gift card being redeemed is remote and that
there is no legal obligation to remit the unredeemed gift cards to relevant
jurisdictions (gift card breakage). The Company determines the gift card breakage
rate based on historical redemption patterns. The Company accumulated enough
historical data to determine the gift card breakage rate at Bath & Body Works and
Express during the fourth quarter of 2005 and Victoria’s Secret during the fourth
quarter of 2007. Gift card breakage is included in Net Sales in the Consolidated
Statements of Income.

During the fourth quarter of 2005, the Company recognized $30 million in pretax
income related to the initial recognition of gift card breakage at Express and
Bath & Body Works. During the fourth quarter of 2007, the Company recognized
$48 million in pretax income related to the initial recognition of gift card breakage
at Victoria’s Secret.

Additionally, the Company recognizes revenue associated with merchandise
sourcing services provided to third parties, consisting of former subsidiaries as
well as other third parties. Revenue is recognized at the time the title passes to the
customer

								
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