Best Buy 2007 Annual Report Download - page 87

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$ in millions, except per share amounts
72
We adopted SAB No. 108 in the fourth quarter of fiscal
2007. The cumulative effect of initially applying the
provisions of SAB No. 108, may be reported as a
cumulative adjustment to retained earnings at the beginning
of the year of adoption. The adoption of SAB No. 108 had
no impact on our net earnings or financial position.
In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in
generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS No. 157
applies under other accounting pronouncements that
require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements
that fair value is the relevant measurement attribute.
Accordingly, SFAS No. 157 does not require any new fair
value measurements. SFAS No. 157 is effective for fiscal
years beginning after December 15, 2007. We plan to
adopt SFAS No. 157 beginning in the first quarter of fiscal
2009. We are evaluating the impact, if any, the adoption of
SFAS No. 157 will have on our operating income or net
earnings.
In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits companies to choose to measure
many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by
providing companies with the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge
accounting provisions. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. Companies are
not allowed to adopt SFAS No. 159 on a retrospective basis
unless they choose early adoption. We plan to adopt SFAS
No. 159 at the beginning of fiscal 2009. We are evaluating
the impact, if any, the adoption of SFAS No. 159 will have
on our operating income or net earnings.
2. Discontinued Operations
In fiscal 2004, we sold our interest in Musicland. The buyer
assumed all of Musicland’s liabilities, including
approximately $500 in lease obligations and paid no cash
consideration, in exchange for all of the capital stock of
Musicland. The transaction also resulted in the transfer of
all of Musicland’s assets, other than a distribution center in
Franklin, Indiana, and selected nonoperating assets.
On March 25, 2005, we received notification from the
Internal Revenue Service (“IRS”) of a favorable resolution of
outstanding tax matters regarding the disposition of our
interest in Musicland. Based on the agreement with the IRS,
we reversed previously recorded valuation allowances on
deferred tax assets related to the disposition of our interest in
Musicland and recognized a $50 tax benefit in fiscal 2005.
In accordance with SFAS No. 144, Musicland’s financial
results are reported separately as discontinued operations
for all periods presented. No assets or liabilities of
Musicland were included in our consolidated balance
sheets at March 3, 2007, or February 25, 2006.
3.Acquisitions
Pacific Sales Kitchen and Bath Centers, Inc.
On March 7, 2006, we acquired all of the common stock
of Pacific Sales for $411, or $408, net of cash acquired,
including transaction costs. We acquired Pacific Sales, a
high-end home-improvement and appliance retailer, to
enhance our ability to grow with an affluent customer base
and premium brands using a proven and successful
showroom format. Utilizing the existing store format, we
expect to expand the number of stores in order to capitalize
on the expanding high-end segment of the U.S. appliance
market. The acquisition was accounted for using the
purchase method in accordance with SFAS No. 141,
Business Combinations. Accordingly, we recorded the net
assets at their estimated fair values, and included operating
results in our Domestic segment from the date of
acquisition. We allocated the purchase price on a
preliminary basis using information then available. The
allocation of the purchase price to the assets and liabilities
acquired was finalized in the fourth quarter of fiscal 2007.
There were no significant adjustments to the preliminary
purchase price allocation. All goodwill is deductible for tax
purposes.