Aarons 2013 Annual Report Download - page 58

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The Company maintains an allowance for doubtful accounts. The reserve for returns is calculated based on the historical
collection experience associated with lease receivables. The Company’s policy is to write off lease receivables that are 60 days
or more past due on pre-determined dates occurring twice monthly. The following is a summary of the Company’s allowance
for doubtful accounts as of December 31:
(In Thousands) 2013 2012 2011
Beginning Balance $ 6,001 $ 4,768 $ 4,544
Accounts written off (34,723) (30,609) (25,178)
Bad debt expense 35,894 31,842 25,402
Ending Balance $ 7,172 $ 6,001 $ 4,768
Property, Plant and Equipment
The Company records property, plant and equipment at cost. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the respective assets, which range from five to 40 years for buildings and improvements
and from one to fifteen years for other depreciable property and equipment. Costs incurred to develop software for internal use
are capitalized and amortized over the estimated useful life of the software, which ranges from five to 10 years.
Gains and losses related to dispositions and retirements are recognized as incurred. Maintenance and repairs are also expensed
as incurred; renewals and betterments are capitalized. Depreciation expense for property, plant and equipment is included in
operating expenses in the accompanying consolidated statements of earnings and was $53.3 million, $53.1 million and $45.2
million during the years ended December 31, 2013, 2012 and 2011, respectively. Amortization of previously capitalized
software development costs, which is a component of depreciation expense for property, plant and equipment, was $3.3 million,
$2.6 million and $1.5 million during the years ended December 31, 2013, 2012 and 2011, respectively.
The Company assesses its long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that
the carrying amount may not be fully recoverable. When it is determined that the carrying values of the assets are not
recoverable, the Company compares the carrying values of the assets to their fair values as estimated using discounted expected
future cash flows, market values or replacement values for similar assets. The amount by which the carrying value exceeds the
fair value of the asset, if any, is recognized as an impairment loss.
Assets Held for Sale
Certain properties, primarily consisting of parcels of land and commercial buildings, met the held for sale classification criteria
at December 31, 2013 and 2012. After adjustment to fair value, the $15.8 million and $11.1 million carrying value of these
properties has been classified as assets held for sale in the consolidated balance sheets as of December 31, 2013 and 2012,
respectively. The Company estimated the fair values of these properties using market values for similar properties and these
properties are considered Level 2 assets as defined in ASC Topic 820, Fair Value Measurements.
The Company recorded impairment charges of $3.8 million, $1.1 million and $453,000 in 2013, 2012 and 2011, respectively.
Such impairment charges related primarily to the impairment of various land outparcels and buildings included in the Sales and
Lease Ownership segment that the Company decided not to utilize for future expansion and are generally included in other
operating expense (income), net within the consolidated statements of earnings. Impairment charges for the year ended
December 31, 2013 included a $766,000 write-down of the net assets of the RIMCO operating segment in connection with the
Company's decision to sell the 27 Company-operated RIMCO stores and has been included in the results of the Other segment.
Gains and losses on the disposal of assets held for sale amounted to net gains of $1,247,000 in 2012 and were not significant in
2013 and 2011.
As of December 31, 2013, $9.7 million of assets held for sale are included in the RIMCO segment (principally consisting of
$7.2 million of lease merchandise and $2.5 million of property, plant and equipment) and $6.2 million of assets held for sale are
included in the Other segment.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net tangible and intangible
assets acquired in connection with business acquisitions. Impairment occurs when the carrying value of goodwill is not
recoverable from future cash flows. The Company performs an assessment of goodwill for impairment at the reporting unit
level annually as of September 30 and when events or circumstances indicate that impairment may have occurred. Factors
which could necessitate an interim impairment assessment include a sustained decline in the Company’s stock price, prolonged