Gap (GPS)

We recognize revenue and the related cost of goods sold at
the time the products are received by the customers in accordance with the provisions of Staff Accounting Bulletin No. (“SAB”) 101, “Revenue Recognition in Financial Statements,” as amended by SAB 104, “Revenue
Recognition.” Revenue is recognized for store sales when the customer receives and pays for the merchandise at the register. For sales from our online and catalog business, we estimate and defer revenue and the related product costs for
shipments that are in-transit to the customer. Revenue is recognized at the time we estimate the customer receives the product which is typically within a few days of shipment. Deferred revenue was $4 million as of January 31, 2009
and February 2, 2008. Amounts related to shipping and handling that are billed to customers are reflected in net sales and the related costs are reflected in cost of goods sold and occupancy expenses in the Consolidated Statements of
Earnings. Revenues are presented net of any taxes collected from customers and remitted to governmental authorities.

Allowances for estimated returns are recorded
based on estimated gross profit using our historical return patterns.

We sell merchandise to franchisees under multi-year franchise agreements. We recognize
revenue from sales to franchisees at the time merchandise ownership is transferred to the franchisee. These sales are classified as net sales and the related cost of goods sold is classified as cost of goods sold and occupancy expenses in the
Consolidated Statements of Earnings. We also receive royalties from these franchisees based on a percentage of the total merchandise purchased by the franchisee, net of any refunds or credits due them. Royalty revenue is recognized when
merchandise ownership is transferred to the franchisee and is classified as net sales in the Consolidated Statements of Earnings.

We recognize revenue and the related cost of goods sold at the time
the products are received by the customers in accordance with the provisions of Staff Accounting Bulletin No. (“SAB”) 101, “Revenue Recognition in Financial Statements,” as amended by SAB 104, “Revenue Recognition.”
Revenue is recognized for store sales when the customer receives and pays for the merchandise at the register. For online sales, we estimate and defer revenue and the related product costs for shipments that are in-transit to the customer. Revenue
is recognized at the time we estimate the customer receives the product which is typically within a few days of shipment. Deferred revenue was $4 million as of February 2, 2008 and February 3, 2007. Amounts related to shipping and
handling that are billed to customers are reflected in net sales and the related costs are reflected in cost of goods sold and occupancy expenses. Revenues are presented net of any taxes collected from customers and remitted to governmental
authorities.

Allowances for estimated returns are recorded based on estimated gross profit using our historical return patterns.