AutoNation 2015 Annual Report Download - page 66

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Table of Contents
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incentives, floorplan assistance, and non-reimbursement-based manufacturer advertising. Parts, accessories, and other inventory are valued at the lower of
acquisition cost (first-in, first-out) or market. See Note 3 of the Notes to Consolidated Financial Statements for more detailed information about our inventory.
Property and Equipment, net
Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized, while
minor replacements, maintenance, and repairs are charged to expense as incurred. In addition, we capitalize interest on borrowings during the active
construction period of capital projects. Capitalized interest is added to the cost of the assets and depreciated over the estimated useful lives of the assets.
Leased property meeting certain criteria is capitalized and the present value of the related lease payments is recorded as a liability and included in current
and/or long-term debt based on the lease term. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in Other Income, Net (within Operating Income) in the Consolidated Statements of Income. See Note 4 of
the Notes to Consolidated Financial Statements for detailed information about our property and equipment.
Depreciation is provided over the estimated useful lives of the assets involved using the straight-line method. Leasehold improvements and capitalized
lease assets are amortized to depreciation expense over the estimated useful life of the asset or the respective lease term used in determining lease
classification, whichever is shorter. The range of estimated useful lives is as follows:
Buildings and improvements 5 to 40 years
Furniture, fixtures, and equipment 3 to 10 years
We continually evaluate property and equipment, including leasehold improvements, to determine whether events or changes in circumstances have
occurred that may warrant revision of the estimated useful life or whether the remaining balance should be evaluated for possible impairment. We use an
estimate of the related undiscounted cash flows over the remaining life of the property and equipment in assessing whether an asset has been impaired. We
measure impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value. See Note 16 of the Notes to Consolidated
Financial Statements for information about our fair value measurements.
During 2015, we recorded non-cash impairment charges of $3.1 million related to long-lived assets held and used in continuing operations. The non-cash
impairment charges are included in Other Income, Net (within Operating Income) in our Consolidated Statements of Income and are reported in the
“Corporate and other” category of our segment information. During 2014, there were no impairment charges recorded for the carrying value of long-lived
assets held and used in continuing operations.
When property and equipment is identified as held for sale, we reclassify the held for sale assets to Other Current Assets and cease recording depreciation.
Assets held for sale in both continuing operations and discontinued operations are reported in the “Corporate and other” category of our segment
information.
We had assets held for sale of $47.1 million at December 31, 2015, and $64.7 million at December 31, 2014, included in continuing operations. We
recorded non-cash impairment charges of $3.0 million in 2015 and $1.1 million in 2014 associated with assets held for sale in continuing operations. These
charges are recorded as a component of Other Income, Net (within Operating Income) in the Consolidated Statements of Income and are reported in the
“Corporate and other” category of our segment information.
We had assets held for sale of $22.3 million at December 31, 2015, and $23.2 million at December 31, 2014, included in discontinued operations. We
recorded non-cash impairment charges of $0.8 million in 2015 and $0.2 million in 2014 related to long-lived assets held for sale in discontinued operations.
These non-cash impairment charges are included in Loss from Discontinued Operations in our Consolidated Statements of Income.
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