Best Buy 2002 Annual Report Download - page 43

Best Buy Co., Inc. 41
Derivative Financial Instruments
SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, requires that all derivatives be recorded
on the balance sheet at fair value. At March 2, 2002, the
fair value of existing interest-rate swaps was not significant.
Reclassifications
Certain previous year amounts have been reclassified
to conform to the current year presentation. These
reclassifications had no impact on net earnings or
financial position.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective
for fiscal years beginning after Dec. 15, 2001. Under
these new standards, all acquisitions subsequent to June
30, 2001, must be accounted for by the purchase method
of accounting, and goodwill is no longer amortized over
its useful life. Rather, goodwill will be subject to an
annual impairment test based on its fair value. Separable
intangible assets that are determined to have a finite life
will continue to be amortized over their useful lives. We are
currently evaluating these pronouncements to determine the
impact, if any, they may have on our net earnings or
financial position.
In August 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, effective for fiscal years beginning after Dec. 15,
2001. This statement develops one accounting model
(based on the model in SFAS No. 121) for long-lived
assets to be disposed of, expands the scope of discontinued
operations and modifies the accounting for discontinued
operations. The adoption of this new statement is not
expected to have material impact on our net earnings or
financial position.
2. Acquisitions
Effective Nov. 4, 2001, we acquired all of the common
stock of Future Shop for $377, or $368 net of cash
acquired, including transaction costs. We acquired Future
Shop to further our expansion plans and increase
shareholder value. The acquisition was accounted for
using the purchase method in accordance with SFAS
No. 141. Accordingly, the net assets were recorded at
their estimated fair values, and operating results were
included in our financial statements from the date of
acquisition. The purchase price was allocated on a
preliminary basis using information currently available.
The allocation of the purchase price to the assets and
liabilities acquired will be finalized in fiscal 2003. We
will adjust the allocation of the purchase price after
obtaining more information regarding asset valuations,
liabilities assumed and revisions of preliminary estimates of
fair values made at the date of purchase. The preliminary
allocations resulted in goodwill of approximately $406,
which is non-deductible for tax purposes. Under SFAS
No.142, goodwill is not amortized.
The preliminary purchase price allocation was as follows:
Merchandise inventories $169
Property and equipment 108
Other assets 40
Goodwill 406
Current liabilities (342)
Long-term debt, including current portion (13)
$368
During the fourth quarter of fiscal 2001, we acquired the
common stock of Magnolia Hi-Fi for $88 in cash, including
transaction costs, and the common stock of Musicland for
$425, including transaction costs, plus long-term debt
valued at $2
7 1. The acquisitions were accounted for
$ in millions, except per share amounts