Abercrombie & Fitch 2013 Annual Report Download - page 42

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42
Policy Effect if Actual Results Differ from Assumptions
Property and Equipment
Long-lived assets, primarily comprised of property and
equipment, are reviewed whenever events or changes in
circumstances indicate that full recoverability of net asset
group balances through future cash flows is in question. In
addition, the Company conducts an annual impairment
analysis in the fourth quarter of each year. For the purposes
of the annual review, the Company reviews long-lived assets
associated with stores that have an operating loss in the
current year and have been open for at least two full years.
The Company’s impairment calculation requires management
to make assumptions and judgments related to factors used in
the evaluation for impairment, including, but not limited to,
management’s expectations for future operations and
projected cash flows. The key assumptions used in our
undiscounted future cash flow model include sales, gross
margin and, to a lesser extent, operating expenses.
The Company has not made any material changes in the
accounting methodology used to determine impairment loss
over the past three fiscal years.
During Fiscal 2012, 44 stores, which excludes stores with a
de minimis book value, were tested for impairment during the
fourth quarter as part of our annual review of all stores. Of
the 44 stores tested for impairment, 17 failed step one and
were impaired. Of the 27 stores not impaired, 18 stores, with
an aggregate net asset group value of $17.0 million, had
undiscounted cash flows which were 150% or more of this
net asset group value. Nine stores, with an aggregate net asset
group value of $2.6 million, had undiscounted cash flows
which were in the range of 100% to 150% of this net asset
group value.
The Company does not expect material changes in the near
term to the assumptions underlying its impairment
calculations as of February 2, 2013. However, if changes in
these assumptions do occur, and, should those changes be
significant, they could have a material impact on the
Company’s determination of whether or not there has been an
impairment.
A 10% decrease in the sales assumption used to project future
cash flows in Fiscal 2012 impairment test would have
increased the impairment charge by approximately $17.0
million for Fiscal 2012.
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