Barnes and Noble 1997 Annual Report Download - page 29

as of February 1, 1997, are amortized over 40 years using the
straight-line method.
Amortization of goodwill and trade names included in depre-
ciation and amortization in the accompanying consolidated
statements of operations is $3,257, $3,305 and $4,272 during
fiscal 1997, 1996 and 1995, respectively. Accumulated amortiza-
tion at January 31, 1998 and February 1, 1997 was $41,293 and
$38,036, respectively.
The Company periodically evaluates the recoverability of
goodwill and considers whether this goodwill should be
completely or partially written off or the amortization periods
accelerated. The Company assesses the recoverability of this
goodwill based upon several factors, including management’s
intention with respect to the acquired operations and those opera-
tions’ projected undiscounted store-level cash flows.
Deferred Charges
Costs incurred to obtain long-term financing are amortized
over the terms of the respective debt agreements using the
straight-line method, which approximates the interest method.
Unamortized costs included in other noncurrent assets as of
January 31, 1998 and February 1, 1997 were $1,764 and $9,789,
respectively. Unamortized costs of $8,209 were included in the
extraordinary loss due to early extinguishment of debt for fiscal
1997. Amortization expense included in interest and amortization
of deferred financing fees is $1,678, $1,846, and $2,304 during
fiscal 1997, 1996 and 1995, respectively.
Revenue Recognition
Revenue from sales of the Company’s products is recognized
at the time of sale.
The Company sells memberships which entitle purchasers to
additional discounts. The membership revenue is deferred and
recognized as income over the twelve-month membership period.
Sales returns (which are not significant) are recognized at the
time returns are made.
Pre-opening Expenses
Costs directly associated with the opening of new stores,
primarily payroll and occupancy costs, are deferred and amortized
over the respective store’s first 12 months of operations.
Closed Store Expenses
Upon a formal decision to close or relocate a store, the
Company charges unrecoverable costs to expense. Such costs
include the net book value of abandoned fixtures and leasehold
improvements and a provision for future lease obligations, net of
expected sublease recoveries. Costs associated with store closings
of $5,113 during fiscal 1995 are included in selling and administra-
tive expenses in the accompanying consolidated statements
of operations.
Net Earnings (Loss) Per Common Share
In 1997 the Company adopted Statement of Financial
Accounting Standards No.128, “Earnings per Share” (SFAS 128).
Under SFAS 128, the presentation of primary and fully diluted
earnings per share is replaced by basic and diluted earnings per
share. Basic earnings per share includes no dilutive effect of
common stock equivalents and is computed by dividing income
available to common shareholders by the weighted-average
number of common shares outstanding. Diluted earnings per
share reflects, in periods in which they have a dilutive effect, the
impact of common shares issuable upon exercise of stock options.
Also, as more fully described in Note 7, the Company effected a two-
for- one stock split during September 1997. Accordingly, all histori-
cal weighted-average share and per share amounts have been
restated to reflect the stock split and the adoption of SFAS 128.
Income Taxes
The provision (benefit) for income taxes includes federal,
state and local income taxes currently payable and those deferred
because of temporary differences between the financial statement
and tax bases of assets and liabilities. The deferred tax assets and
liabilities are measured using the enacted tax rates and laws that
are expected to be in effect when the differences reverse.
Stock Options
The Company accounts for all transactions under which
employees receive shares of stock or other equity instruments
in the Company or the Company incurs liabilities to employees
in amounts based on the price of its stock in accordance with the
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Notes to Consolidated Financial Statements continued