Best Buy 2005 Annual Report Download - page 95

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$ in millions, except per share amounts
Historically, we recognized rent expense beginning at the In addition, we reclassified certain tenant allowances in
inception of the contractual lease term, which was our consolidated balance sheet at February 26, 2005,
generally when the store opened. Effective with the fourth from a contra asset in property and equipment to accrued
quarter of fiscal 2005, we now recognize rent expense liabilities or long-term liabilities, as appropriate.
beginning when we take possession of the property unless These adjustments had no affect on our historical or future
we are actively constructing the facility in which case cash flows, or the timing of our lease payments.
straight-line rent amounts are capitalized. Transaction costs associated with the sale and leaseback
The $21 charge to interest expense was related to the of properties and any related gain or loss are recognized
change in accounting for certain leases as financing on a straight-line basis over the initial period of the lease
leases rather than operating leases, as these leases did agreements. Receivables associated with the sale and
not qualify for sale-leaseback treatment in accordance leaseback of properties are included in other current
with SFAS No. 98, Accounting for Leases: Sale-Leaseback assets. We do not have any retained or contingent
Transactions Involving Real Estate, Sales-Type Leases of interests in the properties nor do we provide any
Real Estate, Definition of the Lease Term, and Initial Direct guarantees in connection with the sale and leaseback of
Costs of Direct Financing Leases. For financing leases, the properties, other than a corporate-level guarantee of lease
gross cost of constructing the asset is included in property payments.
and equipment and amounts reimbursed from the We also lease certain equipment under noncancelable
landlord are recorded as financing obligations. In fiscal operating and capital leases. Assets acquired under
2005, we made a $107 adjustment to increase property capital leases are depreciated over the shorter of the
and equipment, and financing obligations. This adjustment useful life of the asset or the initial lease term.
was considered a noncash transaction and has been During fiscal 2004, we entered into a capital lease
excluded from the consolidated statements of cash flows. agreement totaling $26 for certain equipment used in our
Financing obligations are included in our consolidated stores. During fiscal 2005, we entered into a capital lease
balance sheets in current portion of long-term debt and agreement totaling $10 for a facility. These leases were
long-term debt, as appropriate. noncash transactions and have been eliminated from our
consolidated statements of cash flows.
The composition of rental expenses for all operating leases, during the past three fiscal years, including leases of
property and equipment, was as follows:
2005 2004 2003
Minimum rentals $516 $484 $452
Contingent rentals 111
Total rent expense for continuing operations 517 485 453
Less: sublease income (16) (17) (13)
Net rent expense for continuing operations $501 $468 $440
79