Best Buy 2006 Annual Report Download - page 76

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$ in millions, except per share amounts
62
Cash or lease incentives (tenant allowances) received upon
entering into certain store leases are recognized on a
straight-line basis as a reduction to rent from the date we
take possession of the property through the endof the initial
lease term. We record the unamortized portion of tenant
allowances as a part of deferred rent, in accrued liabilities
or long-term liabilities, as appropriate.
At February 25, 2006, andFebruary 26, 2005, deferred
rent included in accruedliabilities in ourconsolidated
balance sheets was $16 and $13, respectively, and
deferred rent included in long-term liabilities in our
consolidated balance sheets was$211 and $193,
respectively.
We capitalize straight-line rent amounts during the major
construction phase of leasedproperties. Straight-line rent is
expensed as incurred subsequent to the major construction
phase, including the periodprior to the store opening. See
Note 1, Summary of Significant Accounting Policies — New
Accounting Standards, for discussion of Financial
Accounting Standards Board (FASB) Staff Position (FSP)
No. 13-1, Accounting for Rental Costs Incurred During a
Construction Period, which we will adopt on a prospective
basis in the first quarter of fiscal 2007.
Transaction costs associated withthe sale and leaseback of
properties and any related gainor loss are recognized on a
straight-line basis over the initial period of the lease
agreements. Receivables associated with the sale and
leaseback of properties are included in other current assets.
We do not have any retained or contingent interests in the
properties nor do we provide any guarantees in connection
with the sale and leaseback of properties, other than a
corporate-level guarantee of lease payments.
We also lease certain equipment undernoncancelable
operatingand capital leases. Assets acquired under capital
leases are depreciated over the shorter of the useful life of
the asset or the lease term, including renewal periods,if
reasonably assured.
Goodwill and Intangible Assets
Goodwill
Goodwill is the excess of the purchase price over the fair
value of identifiable net assets acquired in business
combinations accounted for under the purchase method.
We do not amortize goodwill but test it for impairment
annually, orwhen indications of potential impairment exist,
utilizingafair value approach at the reporting unit level. A
reporting unit is the operating segment, or a business unit
one level below that operating segment, forwhich discrete
financial information is preparedand regularlyreviewed by
segment management.
We determine fairvalues utilizing widely accepted valuation
techniques, including discounted cash flows and market
multiple analyses. During the fourth quarter of fiscal 2006,
we completed our annual impairment testing ofour
goodwill and the Future Shop tradename, using the
valuation techniques as described above, and determined
there was no impairment.
The changes in the carrying amount of goodwill by segment for continuing operations wereas follows:
Domestic International Total
Balances at March 1, 2003 $ 3$ 4 26 $ 4 29
Changes in foreign currency exchange rates — 48 48
Balances at February 28, 2004 3474 477
Changes in foreign currency exchange rates — 36 36
Balances at February 26,2005 3510 513
Goodwill resulting from acquisitions 3 1 4
Changes in foreign currency exchange rates — 40 40
Balances at February 25,2006 $ 6$ 5 51 $ 5 57