Revenue Recognition Accounting Policy
Lowe's Cos. Inc. recognizes revenues, net of sales tax, when sales transactions occur and customers take possession of the merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of sales in the period that the related sales are recorded. Revenues from product installation services are recognized when the installation is completed. Deferred revenues associated with amounts received for which customers have not yet taken possession of merchandise or for which installation has not yet been completed were $430 million and $371 million at February 3, 2012, and January 28, 2011, respectively.
Revenues from stored-value cards, which include gift cards and returned merchandise credits, are deferred and recognized when the cards are redeemed. The liability associated with outstanding stored-value cards was $371 million and $336 million at February 3, 2012, and January 28, 2011, respectively, and these amounts are included in deferred revenue on the consolidated balance sheets.Lowe's Cos. Inc. recognizes income from unredeemed stored-value cards at the point at which redemption becomes remote. Lowe's Cos. Inc.'s stored-value cards have no expiration date or dormancy fees. Therefore, to determine when redemption is remote, Lowe's Cos. Inc. analyzes an aging of the unredeemed cards based on the date of last stored-value card use.
Source: Lowe's Cos. Inc., Annual Report
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