RH Revenue Disclosure

Revenue Recognition

We recognize revenue and the related cost of goods sold when a customer obtains control of the merchandise, which is when the customer has the ability to direct the use of and obtain the benefits from the merchandise. Revenue recognized for merchandise delivered via the home delivery channel is recognized upon delivery. Revenue recognized for merchandise delivered via all other delivery channels is recognized upon shipment. Revenue from “cash-and-carry” store sales are recognized at the point of sale. Discounts or other accommodations provided to customers are accounted for as a reduction of net revenues on the consolidated statements of income.

We recognize shipping and handling fees as activities to fulfill the promise to transfer the merchandise to customers. We apply this policy consistently across all of our distribution channels. The related costs of shipping and handling activities are accrued for in the same period as revenue is recognized. Costs of shipping and handling are included in cost of goods sold on the consolidated statements of income.

Sales tax, value added tax (VAT) or other equivalent tax collected is not recognized as revenue but is included in accounts payable and accrued expenses on the consolidated balance sheets as it is ultimately remitted to governmental authorities.

Our customers may return purchased items for a refund in accordance with our policies. Projected merchandise returns, which are often resalable merchandise, are reserved on a gross basis based on historical return rates. The allowance for sales returns is presented within other current liabilities and the estimated value of the right of return asset for merchandise is presented within prepaid expense and other assets on the consolidated balance sheets.

Merchandise exchanges of the same product and price are not considered merchandise returns and, therefore, are excluded when determining the allowance for sales returns.

The allowance for sales returns was as follows:

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