NOTE 10 – DEFERRED COSTS

In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms may vary. Under these agreements, the customer may receive a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from the Corporation over the stated term of the agreement or the minimum purchase volume commitment. In the event an agreement is not completed, in most instances, the Corporation has a claim for unearned advances under the agreement. The agreements may or may not specify the Corporation as the sole supplier of social expression products to the customer. See Note 1 – Deferred Costs for further information.

A portion of the total consideration may not be paid by the Corporation at the time the agreement is consummated. All future payment commitments are classified as liabilities at inception until paid. The payments that are expected to be made in the next twelve months are classified as “Other current liabilities” on the Consolidated Statement of Financial Position and the remaining payment commitments beyond the next twelve months are classified as “Other liabilities.” The Corporation maintains a general allowance for deferred costs related to supply agreements of $3,571 and $2,300 at February 29, 2016 and February 28, 2015, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

Circumstances may arise, particularly with a fixed term agreement, whereby the future economic benefit expected by the Corporation, as negotiated within specific customer agreements, is lower than initially anticipated. If this occurs, the deferred costs capitalized at the inception of the agreement for incentives committed to the customer may exceed the lower-than-expected future benefit. Such an event occurred in the fourth quarter of 2016 and consequently, the Corporation recorded an impairment charge of $8,510. In 2015, due to the bankruptcy of a single customer, the Corporation recorded an impairment charge of $4,422, of which $853 was subsequently recovered in 2016. The recovery as well as the non-cash impairment charges were reflected within “Net sales” on the Consolidated Statement of Income for the years then ended.

Deferred costs and future payment commitments were as follows:


	February 29, 2016			February 28, 2015
Prepaid expenses and other	$	92,639		$	98,061
Other assets		378,223			364,311

Deferred cost assets		470,862			462,372

Other current liabilities		(47,142	)		(59,018	)
Other liabilities		(145,856	)		(104,127	)

Deferred cost liabilities		(192,998	)		(163,145	)

Net deferred costs	$	277,864		$	299,227

A summary of the changes in the carrying amount of the Corporation’s net deferred costs during the years ended February 29, 2016, February 28, 2015 and February 28, 2014 is as follows:


Balance at February 28, 2013	$	272,597
Payments		130,970
Amortization		(108,761	)
Currency translation		(484	)

Balance at February 28, 2014		294,322
Payments		124,258
Amortization		(114,125	)
Contract asset impairment		(4,422	)
Currency translation		(806	)

Balance at February 28, 2015		299,227
Payments		108,290
Amortization		(121,169	)
Contract asset impairment, net of recovery		(7,657	)
Currency translation		(827	)

Balance at February 29, 2016	$	277,864