- Have there been major changes in revenue recognition principles last year? (Write 6-7 sentences).
- Are there any challenges or unsatisfactory areas that existing revenue recognition principles pose for this company's specific product or services? (Write 6-7 sentences).
The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that ereate variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related tases collected from customers and remitted to government authorities are excluded from revenue. Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merehandise purchased at the Company's own retail stores and shop-within-shop locations, or upon reeeipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale Gift cards purchased by customers are recorded as a liability until they are redeemed for products sold by the Company's retail business, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeaned giff cards to the relevant jurisdietion as unelaimed or abandoned property. Such estimates are based upon historical redemption trends, with breaknge incone recognized in proportion to the pattern of actual customer redemptions: Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is transferted to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, diseounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Retums and allowances require pre-approyal from managernent and discounts are based on trade terms. Estimates for end-of-scason markdown reserves are based on historical trends, actual and forccasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Fistimates for operational chargebacks are based on actual customer notifications of order fulfiltment disereponcies and historical tuends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these amounts have not differed materially from actual results. Revenue from the Company's licensing amangements is recognixed over time during the period that licensees ure provided access to the Company's trademarks (i.e, symbolic intellectual property) and benefit from such access through their own sales of licensed ptoducts. These arrangements tequire licensees to pay a sales-based royalty, which for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Compuny reeognizes revenue for sales-based royalty arrangements (inctuding those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the ninimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of progress and pantern of recognition best represents the value transferred to the licensec over the term of the armangement, as well as the amount of corsideration that the Company is entitled to receive in exchange for providing access to its trademarks. As of April 2, 2022, contractually-guaranteed minimum royalty amounts expected to be recognired as revenue during future periods were as follows: (6) Amounts presented do not contemplate potential contract renewals or royalties earned in excess of the contractually-guaranteed minimums. Disaggregated Net Reventues The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenue d cash flows are affected by economic factors for the fiscal periods presented: The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that ereate variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related tases collected from customers and remitted to government authorities are excluded from revenue. Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merehandise purchased at the Company's own retail stores and shop-within-shop locations, or upon reeeipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale Gift cards purchased by customers are recorded as a liability until they are redeemed for products sold by the Company's retail business, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeaned giff cards to the relevant jurisdietion as unelaimed or abandoned property. Such estimates are based upon historical redemption trends, with breaknge incone recognized in proportion to the pattern of actual customer redemptions: Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is transferted to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, diseounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Retums and allowances require pre-approyal from managernent and discounts are based on trade terms. Estimates for end-of-scason markdown reserves are based on historical trends, actual and forccasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Fistimates for operational chargebacks are based on actual customer notifications of order fulfiltment disereponcies and historical tuends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these amounts have not differed materially from actual results. Revenue from the Company's licensing amangements is recognixed over time during the period that licensees ure provided access to the Company's trademarks (i.e, symbolic intellectual property) and benefit from such access through their own sales of licensed ptoducts. These arrangements tequire licensees to pay a sales-based royalty, which for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Compuny reeognizes revenue for sales-based royalty arrangements (inctuding those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the ninimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of progress and pantern of recognition best represents the value transferred to the licensec over the term of the armangement, as well as the amount of corsideration that the Company is entitled to receive in exchange for providing access to its trademarks. As of April 2, 2022, contractually-guaranteed minimum royalty amounts expected to be recognired as revenue during future periods were as follows: (6) Amounts presented do not contemplate potential contract renewals or royalties earned in excess of the contractually-guaranteed minimums. Disaggregated Net Reventues The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenue d cash flows are affected by economic factors for the fiscal periods presented
