Bed, Bath and Beyond 2008 Annual Report Download - page 13

BED BATH & BEYOND 2008 ANNUAL REPORT
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and used is measured by a comparison 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 appropriate asset and liability sections of the balance sheet. The Company has not historically
recorded an impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the
extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in
which the impairment occurs.
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 participants 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.
Self Insurance: The Company utilizes a combination of insurance and self insurance for a number of risks including workers’
compensation, general liability, automobile liability and employee related health care benefits (a portion of which is paid by its
employees). Liabilities associated with the risks that the Company retains are estimated by considering historical claims experience,
demographic factors, severity factors and other actuarial assumptions. Although the Company’s claims experience has not
displayed substantial volatility in the past, actual experience could materially varyfrom its historical experience in the future.
Factors that affect these estimates include but are not limited to: inflation, the number and severity of claims and regulatory
changes. In the future, if the Company concludes an adjustment to self insurance accruals is required, the liability will be adjusted
accordingly.
Litigation: The Company records an estimated liability related to various claims and legal actions arising in the ordinary course of
business which is based on available information and advice from outside counsel, where appropriate. As additional information
becomes available, the Company reassesses the potential liability related to such claims and legal actions and revises its estimates,
as appropriate. The ultimate resolution of these ongoing matters as a result of future developments could have a material impact
on the Company’searnings. The Company cannot predict the nature and validity of claims which could be asserted in the future,
and futureclaims could have a material impact on its earnings.
Store Opening, Expansion, Relocation and Closing Costs: Store opening, expansion, relocation and closing costs, including
markdowns, asset residual values and projected occupancy costs, are charged to earnings as incurred.
Stock-Based Compensation: Under SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R), the Company uses
aBlack-Scholes option-pricing model to determine the fair value of its stock options. The Black-Scholes model includes various
assumptions, including the expected life of stock options, the expected risk free interest rate and the expected volatility. These
assumptions reflect the Company’sbest estimates, but they involve inherent uncertainties based on market conditions generally
outside the control of the Company. As a result, if other assumptions had been used, total stock-based compensation cost, as
determined in accordance with SFAS No. 123R, could have been materially impacted. Furthermore, if the Company uses different
assumptions for futuregrants, stock-based compensation cost could be materially impacted in futureperiods.
The Company determines its assumptions for the Black-Scholes option-pricing model in accordance with SFAS No. 123R and/or
SAB No. 107, “Share-Based Payment”.
•The expected life of stock options is estimated based on historical experience.
•The expected risk free interest rate is based on the U.S. Treasury constant maturity interest rate whose term is consistent
with the expected life of the stock options.
•Commencing with fiscal 2008, the Company changed its methodology for expected volatility to be based on the average
of historical and implied volatility. In changing its methodology, the Company considered, among other factors, the current
events affecting the market environment at the date of grant and consistency by utilizing implied volatility as a component
of its current methodology.The Company believes this approach more closely reflects what marketplace participants would
likely use when considering the market environment to determine the expected volatility for the Company’s stock options