Bed, Bath and Beyond 2006 Annual Report Download - page 19

BED BATH& BEYOND ANNUAL REPORT 2006
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Primarily all other investment securities are classified as held-to-maturity because the Company has the ability and intent to hold
these investments until maturity and are stated at amortized cost.
Premiums are amortized and discounts are accreted over the life of the security as adjustments to interest income using the
effective interest method. Dividend and interest income are recognized when earned.
J. Inventory Valuation
Merchandise inventories are stated at the lower of cost or market. Inventory costs for BBB and Harmon are calculated using the
retail inventory method and inventory cost for CTS is calculated using the first-in, first-out cost method. Under the retail inventory
method, the valuation of inventories at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the
retail value of inventories.
At any one time, inventories include items that have been written down to the Company’s best estimate of their realizable value.
Judgment is required in estimating realizable value and factors considered are the age of merchandise and anticipated demand.
Actual realizable value could differ materially from this estimate based upon future customer demand or economic conditions.
The Company estimates its reserve for shrinkage throughout the year, based on historical shrinkage. Actual shrinkage is recorded
at year-end based upon the results of the Company’s physical inventory count. Historically, the Company’s shrinkage has not been
volatile.
K. Property and Equipment
Property and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated
useful lives of the assets (forty years for buildings; five to fifteen years for furniture, fixtures and equipment; and three to five
years for computer equipment and software). Leasehold improvements are amortized using the straight-line method over the
lesser of their estimated useful life or the life of the lease. Depreciation expense is included within Selling, General and
Administrative expenses.
The cost of maintenance and repairs is charged to earnings as incurred; significant renewals and betterments are capitalized.
Maintenance and repairs amounted to $67.0 million, $54.2 million and $51.4 million for fiscal 2006, 2005 and 2004, respectively.
L. Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment annually or when events or changes in circumstances indicate the carrying
value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a compari-
son of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount
by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of would be separately
presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appro-
priate asset and liability sections of the balance sheet.
M. Goodwill and Other Indefinitely Lived Intangible Assets
The Company reviews goodwill and other intangibles that have indefinite lives for impairment annually or when events or
changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Impairment testing is
based upon the best information available including estimates of fair value which incorporate assumptions marketplace partici-
pants would use in making their estimates of fair value. The Company has not historically recorded an impairment to its goodwill
and other indefinitely lived intangible assets. In the future, if events or market conditions affect the estimated fair value to the
extent that an asset is impaired, the Company will adjust the carrying value of these assets in the period in which the impairment
occurs.
Included within other assets in the accompanying consolidated balance sheets as of March 3, 2007 and February 25, 2006
is $147.6 million for goodwill and $19.9 million for the tradename of CTS, which are not subject to amortization.