Barnes and Noble 2006 Annual Report Download - page 30

property and equipment. These costs are amortized over
their estimated useful lives from the date the systems
become operational.
Other Long-Lived Assets
The Company’s other long-lived assets include prop-
erty and equipment, and amortizable intangibles.
At February , , the Company had , of
property and equipment, net of accumulated deprecia-
tion, and , of amortizable intangible assets,
net of accumulated amortization, accounting for
approximately . of the Company’s total assets.
The Company reviews its long-lived assets for impair-
ment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable in accordance with Statement of Financial
Accounting Standards (SFAS) No. , “Accounting for
the Impairment or Disposal of Long-Lived Assets.” The
Company evaluates long-lived assets for impairment
at the individual store level, which is the lowest level
at which individual cash fl ows can be identifi ed. When
evaluating long-lived assets for potential impairment,
the Company will fi rst compare the carrying amount
of the assets to the individual store’s estimated future
undiscounted cash fl ows. If the estimated future cash
fl ows are less than the carrying amount of the assets, an
impairment loss calculation is prepared. The impair-
ment loss calculation compares the carrying amount of
the assets to the individual store’s fair value based on
its estimated discounted future cash fl ows. If required,
an impairment loss is recorded for that portion of the
asset’s carrying value in excess of fair value. Impairment
losses included in selling and administrative expenses
totaled ,, , and  in fi scal , 
and , respectively and relate to individual store
locations.
Goodwill and Unamortizable Intangible Assets
The costs in excess of net assets of businesses acquired
are carried as goodwill in the accompanying consoli-
dated balance sheets.
At February , , the Company had , of
goodwill and , of unamortizable intangible
assets (i.e. those with an indefi nite life), accounting
for approximately . of the Company’s total assets.
SFAS No. , “Goodwill and Other Intangible Assets”,
requires that goodwill and other unamortizable intan-
gible assets no longer be amortized, but instead be
tested for impairment at least annually or earlier if there
are impairment indicators. The Company performs a
two-step process for impairment testing of goodwill
as required by SFAS No. . The fi rst step of this test,
used to identify potential impairment, compares the
fair value of a reporting unit with its carrying amount.
The second step (if necessary) measures the amount of
the impairment. The Company completed its annual
impairment test on the goodwill in November  and
determined that no impairment charge was necessary.
The Company has noted no subsequent indicators of
impairment. The Company also completed its annual
impairment tests for unamortizable intangible assets by
comparing the estimated fair value to the carrying value
of such assets and determined that no impairment was
necessary. Changes in market conditions, among other
factors, could have a material impact on these estimates.
Deferred Charges
Costs incurred to obtain long-term fi nancing are amor-
tized 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 February ,  and January ,
 were , and , respectively. Amortization
expense included in interest and amortization of
deferred fi nancing fees were ,  and , dur-
ing fi scal ,  and , respectively.
Revenue Recognition
Revenue from sales of the Company’s products is rec-
ognized at the time of sale. Sales returns (which are not
signifi cant) are recognized at the time returns are made.
The Barnes & Noble Membership Program entitles the
customer to receive a  discount on all purchases
made ( discount for adult hardcover books) dur-
ing the twelve-month membership period. The annual
membership fee of . is non-refundable after the
fi rst  days of the membership term. Revenue is being
recognized over the twelve-month membership period
based upon historical spending patterns for Barnes &
Noble customers. Refunds of membership fees due to
cancellations within the fi rst  days are minimal.
Advertising Costs
The costs of advertising are expensed as incurred dur-
ing the year pursuant to Statement of Position -,
“Reporting on Advertising Costs.” Advertising costs
charged to selling and administrative expenses were
,, , and , during fi scal , 
and , respectively.
28 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued