Best Buy 2005 Annual Report Download - page 62

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Effect if Actual Results Differ from
Description Judgments and Uncertainties Assumptions
Goodwill and Intangible Assets
We evaluate goodwill and the Future Shop We determine fair value using widely Effective with the adoption of SFAS No. 142,
tradename for impairment annually and accepted valuation techniques, including Goodwill and Other Intangible Assets, at
whenever events or changes in discounted cash flow and market multiple the beginning of fiscal 2003, we
circumstances indicate the carrying value analyses. These types of analyses contain eliminated the systematic amortization of
of the goodwill or the Future Shop uncertainties because they require goodwill and began testing goodwill and
tradename may not be recoverable. We management to make assumptions and the Future Shop tradename for impairment
complete our impairment evaluation by estimates regarding industry economic at least annually. We have not made any
performing internal valuation analyses, factors and the profitability of future other changes to our impairment loss
considering other publicly available market business strategies. It is our policy to assessment methodology during the past
information and using an independent conduct impairment testing based on our three fiscal years.
valuation firm. current business strategy in light of present We do not believe there is a reasonable
industry and economic conditions, as well
In the fourth quarter of fiscal 2005, we likelihood that there will be a material
as future expectations.
completed our annual impairment testing change in the future assumptions or
of goodwill and the Future Shop estimates we use to calculate goodwill
tradename using the methodology impairment losses. However, if actual
described herein, and determined there results are not consistent with our
was no impairment. assumptions and estimates, we may be
exposed to a goodwill impairment charge.
The carrying value of goodwill as of
February 26, 2005, was $513 million. The We do not believe there is a reasonable
carrying value of the Future Shop likelihood that there will be a material
tradename as of February 26, 2005, was change in the future assumptions or
$40 million. estimates we use to calculate Future Shop
tradename impairment losses. However, if
actual results are not consistent with our
assumptions and estimates, or if we ever
were to discontinue the use of the Future
Shop tradename as a result of abandoning
our dual-branding strategy in Canada or
otherwise, we may be exposed to an
impairment charge.
Tax Contingencies
Like most companies, domestic and foreign The estimate of our tax contingencies Although management believes that the
tax authorities periodically audit our reserve contains uncertainties because judgments and estimates discussed herein
income tax returns. These audits include management must use judgment to are reasonable, actual results could differ,
questions regarding our tax filing estimate the exposures associated with our and we may be exposed to losses or gains
positions, including the timing and amount various filing positions. Our effective that could be material.
of deductions and the allocation of income income tax rate is also affected by To the extent we prevail in matters for
among various tax jurisdictions. At any changes in law, the location of new stores which reserves have been established, or
one time, multiple tax years are subject to or business ventures, the level of earnings are required to pay amounts in excess of
audit by the various tax authorities. In and the results of tax audits. our reserves, our effective income tax rate
evaluating the exposures associated with in a given financial statement period could
our various tax filing positions, we record be materially affected. An unfavorable tax
reserves for probable exposures. A settlement would require use of our cash
number of years may elapse before a and result in an increase in our effective
particular matter, for which we have income tax rate in the period of resolution.
established a reserve, is audited and fully A favorable tax settlement would be
resolved. When the actual result of a recognized as a reduction in our effective
settlement with tax authorities differs from income tax rate in the period of resolution.
our established reserve for a matter, we
adjust our tax contingencies reserve and
income tax provision in the period in
which the income tax matter is resolved.
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