Revenue Recognition Footnote

9 Months Ended

Nov. 03, 2018

RevenueRecognitionAndDeferredRevenueAbstract

NOTE 11 – REVENUE RECOGNITION:

On February 3, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“Topic 606”) using the modified retrospective method applied to contracts which were pending as of February 3, 2018. Financial results included in the Company’s Condensed Consolidated Statement of Income for the nine months ended November 3, 2018 are presented under Topic 606, while prior year amounts have not been restated and continue to be reported in accordance with ASC 605, “Revenue Recognition” (“Topic 605”). As a result of adopting Topic 606, the Company did not adjust opening retained earnings.

The Company recognizes sales at the point of purchase when the customer takes possession of the merchandise and pays for the purchase, generally with cash or credit. Sales from purchases made with Cato credit, gift cards and layaway sales from stores are also recorded when the customer takes possession of the merchandise. E-commerce sales are recorded when the risk of loss is transferred to the customer. Gift cards are recorded as deferred revenue until they are redeemed or forfeited. Layaway sales are recorded as deferred revenue until the customer takes possession or forfeits the merchandise. Gift cards do not have expiration dates. A provision is made for estimated merchandise returns based on sales volumes and the Company’s experience; actual returns have not varied materially from historical amounts. A provision is made for estimated write-offs associated with sales made with the Company’s proprietary credit card. Amounts related to shipping and handling billed to customers in a sales transaction are classified as Other revenue and the costs related to shipping product to customers (billed and accrued) are classified as Cost of goods sold.

The Company offers its own proprietary credit card to customers. All credit activity is performed by the Company’s wholly-owned subsidiaries. None of the credit card receivables are secured. The Company estimated uncollectible amounts of $681,000 and $666,000 for the nine months ended November 3, 2018 and October 28, 2017, respectively, on sales purchased on the Company’s proprietary credit card of $20.8 million and $20.1 million for the nine months ended November 3, 2018 and October 28, 2017, respectively.

The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):

	Balance as of
		November 3, 2018		February 3, 2018

Proprietary Credit Card Receivables, net	$	16,380	$	16,857
Gift Card Liability	$	4,798	$	7,565