Financial Accounting, 9th Edition

5 Accounting for Merchandising Operations

Feature Story Buy Now, Vote Later

Have you ever shopped for outdoor gear at an REI (Recreational Equipment Incorporated) store? If so, you might have been surprised if a salesclerk asked if you were a member. A member? What do you mean a member? You soon realize that REI might not be your typical store. In fact, there's a lot about REI that makes it different.

REI is a consumer cooperative, or “co-op” for short. To figure out what that means, consider this quote from the company's annual report:

As a cooperative, the Company is owned by its members. Each member is entitled to one vote in the election of the Company's Board of Directors. Since January 1, 2008, the nonrefundable, nontransferable, one-time membership fee has been $20 dollars. As of December 31, 2010, there were approximately 10.8 million members.

Voting rights? Now that's something you don't get from shopping at Walmart. REI members get other benefits as well, including sharing in the company's profits through a dividend at the end of the year, which can be used for purchases at REI stores during the next two years. The more you spend, the bigger your dividend.

Since REI is a co-op, you might also wonder whether management's incentives might be a little different than at other ...