Home Depot Inc. (HD) | Analysis of Revenues

Revenue Recognition Accounting Policy

Home Depot recognizes revenue, net of estimated returns and sales tax, at the time the customer takes possession of merchandise or receives services. The liability for sales returns is estimated based on historical return levels. When Home Depot receives payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as Deferred Revenue in the accompanying Consolidated Balance Sheets until the sale or service is complete. Home Depot also records Deferred Revenue for the sale of gift cards and recognizes this revenue upon the redemption of gift cards in Net Sales. Gift card breakage income is recognized based upon historical redemption patterns and represents the balance of gift cards for which Home Depot believes the likelihood of redemption by the customer is remote. During fiscal 2011, 2010 and 2009, Home Depot recognized $42 million, $46 million and $40 million, respectively, of gift card breakage income. This income is included in the accompanying Consolidated Statements of Earnings as a reduction in SG&A.

Services Revenue

Net Sales include services revenue generated through a variety of installation, home maintenance and professional service programs. In these programs, the customer selects and purchases material for a project and Home Depot provides or arranges professional installation. These programs are offered through Home Depot's stores and in-home sales programs. Under certain programs, when Home Depot provides or arranges the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. Home Depot recognizes this revenue when the service for the customer is complete.

All payments received prior to the completion of services are recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets. Services revenue was $2.9 billion, $2.7 billion and $2.6 billion for fiscal 2011, 2010 and 2009, respectively.

Source: Home Depot Inc., Annual Report

Revenues as Reported

Home Depot Inc., Income Statement, Revenues

Source: Home Depot Inc. Annual Reports

Item	Description	The company
Net sales	Aggregate revenue recognized during the period (derived from goods sold, services rendered, insurance premiums, or other activities that constitute an entity's earning process). For financial services companies, also includes investment and interest income, and sales and trading gains.	Home Depot Inc.'s net sales increased from 2010 to 2011 and from 2011 to 2012.