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Microsoft Excel LibreOffice Calc

Costco Wholesale Corp. (COST)

Analysis of Revenues

Difficulty: Advanced

Revenue Recognition Accounting Policy

Costco generally recognizes sales, which include gross shipping fees where applicable, net of returns, at the time the member takes possession of merchandise or receives services. When Costco collects payments from members prior to the transfer of ownership of merchandise or the performance of services, the amounts received are generally recorded as deferred sales, included in other current liabilities in the consolidated balance sheets, until the sale or service is completed. Costco reserves for estimated sales returns based on historical trends in merchandise returns and reduces sales and merchandise costs accordingly. The sales returns reserve is based on an estimate of the net realizable value of merchandise inventories expected to be returned. Amounts collected from members for sales or value added taxes are recorded on a net basis.

Generally, when Costco is the primary obligor, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, can influence product or service specifications, or has several but not all of these indicators, revenue is recorded on a gross basis. It otherwise records the net amounts earned, which is reflected in net sales.

Costco accounts for membership fee revenue, net of refunds, on a deferred basis, ratably over the one-year membership. Costco’s Executive members qualify for a 2% reward on qualified purchases (up to a maximum reward of approximately $1,000 per year), which can be redeemed only at Costco warehouses. Costco accounts for this reward as a reduction in sales. The sales reduction and corresponding liability (classified as accrued member rewards in the consolidated balance sheets) are computed after giving effect to the estimated impact of non-redemptions, based on historical data. The net reduction in sales was $1,394, $1,281, and $1,172 in 2018, 2017, and 2016, respectively.

Source: 10-K (filing date: 2018-10-26).

Revenues as Reported

Costco Wholesale Corp., Income Statement, Revenues

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 2, 2018 Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013
United States Operations hidden hidden hidden hidden hidden hidden
Canadian Operations hidden hidden hidden hidden hidden hidden
Other International Operations hidden hidden hidden hidden hidden hidden
Revenue hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-26), 10-K (filing date: 2017-10-18), 10-K (filing date: 2016-10-12), 10-K (filing date: 2015-10-14), 10-K (filing date: 2014-10-15), 10-K (filing date: 2013-10-16).

Item Description The company
Revenue Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss). Costco Wholesale Corp.’s revenue increased from 2016 to 2017 and from 2017 to 2018.