NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (thousands of dollars unless otherwise indicated) Revenue recognition. All revenues were recognized when products were shipped and title had passed to unaffiliated customers. Customer and vendor considerations. The Company offered certain customers rebate and sales incentive pro- grams which were classified as reductions in Net sales. Such programs were in the form of volume rebates, rebates that constituted a percentage of sales or rebates for attaining certain sales goals. The Company received consideration from certain suppliers of raw materials in the form of volume rebates or rebates that constituted a percentage of purchases. These rebates were recognized on an accrual basis by the Company as a reduction of the purchase price of the raw materials and a subse- quent reduction of Cost of goods sold when the related product was sold. Allowance for doubtful accounts. The Company has recorded an allowance for doubtful accounts to reduce accounts receivable to their net realizable value. The allowance was based upon an analysis of historical bad debts, a review of the aging of accounts receivable and the current creditworthiness of customers. Shipping and handling costs. All costs the Company incurred to ship products were included in Cost of goods sold in the Statements of Consolidated Income. Technical expenditures. Total technical expenditures included research and development costs, quality con- trol, product formulation expenditures and other similar items. Research and development costs included in tech- nical expenditures were $34,313, $34,391 and $36,019 for 2004, 2003 and 2002, respectively. Advertising expenses.  The cost of advertising was expensed as incurred. The Company incurred $239,953, $238,754 and $221,572 in advertising costs during 2004, 2003 and 2002, respectively. Minority interest.  Minority interest reflects the minority shareholders’ interest in the net income and equity of Sherwin-Williams Kinlita Co., Ltd. (Kinlita). Environmental matters.  Capital expenditures for ongoing environmental compliance measures were recorded in the Consolidated Balance Sheets, and related expenses were included in the normal operating expenses of conducting business. The Company is involved with environmental investigation and remediation activities at some of its current and former sites and at a number of third-party sites. The Company accrued for environmen- tal remediation-related activities for which commitments or clean-up plans have been developed and for which costs could be reasonably estimated based on industry standards and historical experience. All accrued amounts were recorded on an undiscounted basis. Accrued envi- ronmental remediation-related expenses included direct costs of investigation and remediation and indirect costs such as compensation and benefits for employees directly involved in the investigation and remediation activities and fees paid to outside engineering, consulting and law firms. See Notes 9 and 13. Employee stock purchase and savings plan and pre- ferred stock. The Company accounts for the employee stock purchase and savings plan (ESOP) in accordance with Statement of Position (SOP) No. 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” The Company recognized compensation expense for amounts contributed to the ESOP and the ESOP used dividends on unallocated preferred shares to service debt. Unallocated preferred shares held by the ESOP were not considered outstanding in calculating earnings per share of the Company. See Note 11. Stock-based compensation. At December 31, 2004, the Company had two stock-based compensation plans, as more fully described in Note 12, accounted for under the recognition and measurement principles of Account- ing Principles Board Opinion (APBO) No. 25, “Accounting for Stock Issued to Employees,” and relat- ed interpretations. Pro-forma information regarding the impact of stock-based compensation on net income and income per share is required by SFAS No. 123, “Accounting for Stock-Based Compensation.” Such  pro-forma information, determined as if the Company had accounted for its employee stock options under the fair value method of that statement, is illustrated in the following table: 48