Amendment No. 3 to Form S-1 Table of Contents AB ACQUISITION LLC AND SUBSIDIARIES Notes to Consolidated Financial Statements Vendor Allowances that have been earned as a result of completing the required performance under terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions of inventory. The reduction of inventory for these Vendor Allowances was $92.0 million and $45.3 million as of February 28, 2015 and February 20, 2014, respectively. Advertising costs are included in Cost of sales and are expensed in the period the advertising occurs. Cooperative advertising funds are recorded as a reduction of Cost of sales when the advertising occurs. Advertising costs were $239.9 million, $192.4 million, and $45.5 million, net of cooperative advertising allowances of $16.9 million, $11.5 million, and $2.1 million for fiscal 2014, 2013, and 2012 respectively. Selling and administrative expenses: Selling and administrative expenses consist primarily of store and corporate employee- related costs such as salaries and wages, health and welfare, workers' compensation and pension benefits, as well as marketing and merchandising, rent, occupancy and operating costs, amortization of intangibles and other administrative costs. Equity-Based employee compensation: The Company has granted membership interests to employees and non-employees and accounts for these awards in accordance with the applicable accounting guidance for equity awards issued to employees and non- employees. Employee awards are recorded under the provisions of ASC 718, Compensation—Stock Compensation with equity-based compensation expense measured at the grant date, based on the fair value of the award. As required under this guidance, the Company estimates forfeitures for equity-based grants which are not expected to vest. The Company recognizes compensation expense over the requisite vesting period of the award. The Company recognizes compe