Barnes and Noble 2015 Annual Report Download - page 32

from historical exercise experience under the Company’s
stock option plans and represents the period of time that
stock option awards granted are expected to be outstand-
ing. The assumptions used in calculating the fair value of
stock-based payment awards represent management’s best
estimates, but these estimates involve inherent uncertain-
ties and the application of management’s judgment. As a
result, if factors change and the Company uses different
assumptions, stock-based compensation expense could be
materially different in the future. In addition, the Company
is required to estimate the expected forfeiture rate, and
only recognize expense for those shares expected to vest. If
the Company’s actual forfeiture rate is materially different
from its estimate, the stock-based compensation expense
could be significantly different from what the Company
has recorded in the current period. See Note  to the
Consolidated Financial Statements for a further discussion
on stock-based compensation.
The Company does not believe there is a reasonable
likelihood there will be a material change in the future
estimates or assumptions used to determine stock-based
compensation expense. However, if actual results are not
consistent with the Company’s estimates or assumptions,
the Company may be exposed to changes in stock-based
compensation expense that could be material. If actual
results are not consistent with the assumptions used,
the stock-based compensation expense reported in the
Company’s financial statements may not be representative
of the actual economic cost of the stock-based compensa-
tion. A  change in the Company’s stock-based compen-
sation expense for the year ended May ,  would have
affected pre-tax earnings by approximately . million in
fiscal .
Other Long-Lived Assets
The Company’s other long-lived assets include property
and equipment and amortizable intangibles. At May ,
, the Company had . million of property and
equipment, net of accumulated depreciation, and .
million of amortizable intangible assets, net of amortiza-
tion, accounting for approximately . of the Company’s
total assets. The Company reviews its long-lived assets
for impairment whenever events or changes in circum-
stances indicate that the carrying amount of an asset may
not be recoverable and considers market participants in
accordance with ASC -, Accounting for the Impairment
or Disposal of Long-Lived Assets. The Company evaluates
long-lived assets for impairment at the individual Barnes &
Noble store level, except for B&N College long-lived assets,
which are evaluated for impairment at the school contract
combined store level, which is the lowest level at which
individual cash flows can be identified. When evaluating
long-lived assets for potential impairment, the Company
will first compare the carrying amount of the assets to the
individual store’s estimated future undiscounted cash
flows. If the estimated future cash flows are less than the
carrying amount of the assets, an impairment loss calcula-
tion is prepared. The impairment loss calculation com-
pares the carrying amount of the assets to the individual
store’s fair value based on its estimated discounted future
cash flows. 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 admin-
istrative expenses totaled . million, . million and
. million during fiscal , fiscal  and fiscal ,
respectively. The Company does not believe there is a
reasonable likelihood that there will be a material change
in the estimates or assumptions used to calculate long-
lived asset impairment losses. However, if actual results
are not consistent with estimates and assumptions used
in estimating future cash flows and asset fair values, the
Company may be exposed to losses that could be material. A
 decrease in the Company’s estimated discounted cash
flows would have resulted in an additional . million
impairment charge on the Company’s results of operations
in fiscal .
Goodwill and Unamortizable Intangible Assets
The costs in excess of net assets of businesses acquired
are carried as goodwill in the accompanying consolidated
balance sheets.
At May , , the Company had . million of
goodwill and . million of unamortizable intangible
assets (those with an indefinite useful life), accounting
for approximately . of the Company’s total assets.
ASC -, Goodwill and Other Intangible Assets (ASC
-), requires that goodwill and other unamortizable
intangible 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 ASC -. The first 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 goodwill impairment
test as of the first day of the third quarter of fiscal . In
performing the valuations, the Company used cash flows
that reflected management’s forecasts and discount rates
that included risk adjustments consistent with the current
30 Barnes & Noble, Inc. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued