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ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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Gains on sale of trademarks

From time to time, we sell a brand’s territories and/or categories through joint venture transactions which is a central and ongoing part of our business. The Company considers, among others, the following guidance in determining the appropriate accounting for gains recognized from the initial sale of our brands/trademarks to our joint ventures: ASC 323,  Investments-Equity Method and Joint Venture, ASC 605 and ASC 606,  Revenue Recognition, ASC 810,  Consolidations, ASC 845,  Nonmonetary Transactions—Exchanges Involving Monetary Consideration  and Staff Accounting Bulletin No. 104.


Additionally, the Company determines the cost of the trademarks sold by applying the relative fair market value of the proceeds received in the transaction to the book value of the trademarks on the Company’s consolidated balance sheet at the time of the transaction.


Foreign Currency

The Company’s consolidated joint ventures’ functional currency is U.S. dollars.  The functional currencies of the Company’s international subsidiaries are the local currencies of the countries in which the subsidiaries are located. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the consolidated balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive income (loss).  

Taxes on Income

The Company uses the asset and liability approach of accounting for income taxes and provides deferred income taxes for temporary differences that will result in taxable or deductible amounts in future years based on the reporting of certain costs in different periods for financial statement and income tax purposes. Valuation allowances are recorded when uncertainty regarding their realizability exists.  

Earnings (Loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options and warrants, vesting of restricted stock, and potential conversion of our convertible debt. The difference between reported basic and diluted weighted-average common shares results from the assumption that all dilutive stock options, warrants, convertible debt and restricted stock outstanding were exercised into common stock.

We may be required to calculate basic earnings (loss) per share using the two-class method as a result of the Company’s redeemable non-controlling interests.  To the extent that the redemption value increases and exceeds the then-current fair value of a redeemable non-controlling interest, net (loss) income attributable to Iconix Brand Group, Inc. (used to calculate earnings (loss) per share) could be negatively impacted by that increase, subject to certain limitations.  The partial or full recovery of any reductions to net (loss) attributable to Iconix Brand Group, Inc. (used to calculate earnings (loss) per share) is limited to any cumulative prior-period reductions.  For FY 2018 and FY 2017, earnings (loss) per share was impacted by approximately $0.80 per share (or $5.4 million) and $1.00 per share (or $5.6 million), respectively, for adjustments related to the Company’s redeemable non-controlling interests.  Refer to Note 11 for further details.  

Advertising Campaign Costs

All costs associated with production for the Company’s national advertising campaigns are expensed during the periods when the activities take place. All other advertising costs such as print and online media are expensed when the advertisement first occurs. Advertising expenses for FY 2018 and FY 2017 amounted to $25.7 million, and $30.5 million, respectively.

The Company also incurs co-operative advertising costs that represent reimbursements to certain licensees for shared marketing expenses related to the sale of its products.  In accordance with ASC 606, these reimbursements are recorded as a reduction to licensing revenue.


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