Revenue Recognition

9 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Revenue is recognized when a performance obligation is completed at a point in time and when the customer has obtained control. Control passes to the customer when they have the ability to direct the use of, and obtain substantially all the remaining benefits from, the goods transferred. The amount of revenue recognized is based on the transaction price, which represents the invoiced amount less known actual amounts or estimates of variable consideration.

Variable Consideration. Components of variable consideration include estimated sales discounts, markdowns or chargebacks, and sales returns. Estimates for variable consideration are based on the amounts earned or estimates to be claimed as an adjustment to sales. Estimated variable consideration is included in the transaction price to the extent it is probable that a significant reversal of the cumulative revenue recognized will not occur in a future period. The Company's customer contracts do not have a significant financing component due to their short durations, which are typically effective for one year or less and have payment terms that are generally 30 to 60 days.

Sales Return Asset and Liability. Reserves are recorded for anticipated future returns of goods shipped prior to the end of the reporting period. In general, the Company accepts returns for damaged or defective products for up to one year. The Company also has a policy whereby returns are generally accepted from customers and end consumers between 30 to 90 days from the point of sale for cash or credit. The amounts of these reserves are determined based on several factors, including actual and any recent events that could result in a change to historical return rates. Sales returns are a refund asset for the right to recover the inventory and a refund liability for the stand-ready right of return. Changes to the refund liability are recorded against gross sales and changes to the refund asset for the right to recover the inventory are recorded against cost of sales in the condensed consolidated statements of comprehensive income. The refund liability is recorded in other accrued expenses and the related asset for the right to recover the inventory is recorded in other current assets in the condensed consolidated balance sheets.

Activity during the nine months ended December 31, 2022, related to estimated sales returns were as follows:

	Recovery Asset		Refund Liability
Balance, March 31, 2022	$	11,491	$	(39,867)
Net additions to sales return liability*	55,080		(182,914)
Actual returns	(41,202)		146,695
Balance, December 31, 2022	$	25,369	$	(76,086)

Activity during the nine months ended December 31, 2021, related to estimated sales returns were as follows:

	Recovery Asset		Refund Liability
Balance, March 31, 2021	$	10,704	$	(37,717)
Net additions to sales return liability*	29,603		(122,153)
Actual returns	(26,774)		111,851
Balance, December 31, 2021	$	13,533	$	(48,019)

*Net additions to the sales return liability include a provision for anticipated sales returns, which consists of both contractual return rights and discretionary authorized returns.

Contract Liabilities. Contract liabilities are performance obligations that the Company expects to satisfy or relieve within the next 12 months, advance consideration obtained prior to satisfying a performance obligation, or unconditional obligations to provide goods or services under non-cancelable contracts before the transfer of goods or services to the customer has occurred. Contract liabilities are recorded in other accrued expenses in the condensed consolidated balance sheets, and include loyalty programs and other deferred revenue.

Loyalty Programs. The Company has a loyalty program for the UGG brand in its DTC channel where consumers can earn rewards from qualifying purchases or activities. The Company defers recognition of revenue for unredeemed awards until one of the following occurs: (1) rewards are redeemed by the consumer, (2) points or certificates expire, or (3) an estimate of the expected unused portion of points or certificates is applied, which is based on historical redemption patterns. The Company’s contract liability for loyalty programs is recorded in other accrued expenses in the condensed consolidated balance sheets.

Activity during the nine months ended December 31, 2022, related to loyalty programs were as follows:

	Amounts
Balance, March 31, 2022	$	(10,883)
Redemptions and expirations for loyalty certificates and points recognized in net sales	32,096
Deferred revenue for loyalty points and certificates issued	(41,354)
Balance, December 31, 2022	$	(20,141)

Activity during the nine months ended December 31, 2021, related to loyalty programs were as follows:

	Amounts
Balance, March 31, 2021	$	(12,231)
Redemptions and expirations for loyalty certificates and points recognized in net sales	38,034
Deferred revenue for loyalty points and certificates issued	(42,834)
Balance, December 31, 2021	$	(17,031)

Deferred Revenue. Revenue is deferred for wholesale channel transactions when certain conditions outlined within the contract terms, including the transfer of control or delivery of product, has not occurred, such as when a wholesale channel customer prepays for ordered product. The contract liability for deferred revenue is recorded in other accrued expenses in the condensed consolidated balance sheets.

Activity during the nine months ended December 31, 2022, related to deferred revenue were as follows:

	Amounts
Balance, March 31, 2022	$	(15,804)
Additions of customer cash payments	(41,782)
Revenue recognized	46,138
Balance, December 31, 2022	$	(11,448)

Activity during the nine months ended December 31, 2021, related to deferred revenue were as follows:

	Amounts
Balance, March 31, 2021	$	(5,425)
Additions of customer cash payments	(36,507)
Revenue recognized	28,341
Balance, December 31, 2021	$	(13,591)

Refer to Note 11, "Reportable Operating Segments," for further information on the Company's disaggregation of revenue by reportable operating segment.