Best Buy 2014 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2014 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

63
purchases denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These derivative
instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly to
net earnings. At February 1, 2014, and February 2, 2013, the notional amount of these instruments was $157 million and $173
million, respectively. We recognized a gain of $5 million and $2 million in selling, general and administrative expenses
("SG&A") on our Consolidated Statements of Earnings during fiscal 2014 and 2013 (11-month), respectively, related to these
instruments.
In conjunction with our agreement to sell our 50% ownership interest in Best Buy Europe as described in Note 4, Discontinued
Operations, we entered into a deal-contingent foreign currency forward contract to hedge £455 million of the total £471 million
of net proceeds. The contract was settled in cash following the completion of the sale on June 26, 2013, and we recognized a $2
million loss in gain (loss) from discontinued operations on our Consolidated Statements of Earnings in fiscal 2014.
Property and Equipment
Property and equipment are recorded at cost. We compute depreciation using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from
the date the assets are placed in service to the end of the lease term, which includes optional renewal periods if they are
reasonably assured. Accelerated depreciation methods are generally used for income tax purposes.
When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our Consolidated
Balance Sheets and any resulting gain or loss is reflected in our Consolidated Statements of Earnings.
Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially
extend the useful life of an asset are capitalized and depreciated.
Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the
expected useful life of the software, from three to seven years. A subsequent addition, modification or upgrade to internal-use
software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software
is included in fixtures and equipment. Software maintenance and training costs are expensed in the period incurred.
Property under capital lease is comprised of buildings and equipment used in our operations. The related depreciation for
capital lease assets is included in depreciation expense. The carrying value of property under capital lease was $58 million and
$70 million at February 1, 2014, and February 2, 2013, respectively, net of accumulated depreciation of $62 million and $43
million, respectively.
Estimated useful lives by major asset category are as follows:
Asset Life
(in years)
Buildings 25-50
Leasehold improvements 3-25
Fixtures and equipment 3-20
Property under capital lease 2-20
Impairment of Long-Lived Assets and Costs Associated With Exit Activities
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an
asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not
limited to, significant underperformance relative to historical or planned operating results, significant changes in the manner of
use or expected life of the assets, or significant changes in our business strategies. An impairment loss is recognized when the
estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from the disposition
of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of
the asset is reduced to its estimated fair value based on quoted market prices or other valuation techniques (e.g., discounted
cash flow analysis).
When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level
for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For example, long-