Best Buy 2014 Annual Report Download - page 69

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lived assets deployed at store locations are reviewed for impairment at the individual store level, which involves comparing the
carrying value of all land, buildings, leasehold improvements, fixtures and equipment located at each store to the net cash flow
projections for each store. In addition, we conduct separate impairment reviews at other levels as appropriate, for example, to
evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.
The present value of costs associated with location closings, primarily future lease costs (net of expected sublease income), are
charged to earnings when we have ceased using the specific location. We accelerate depreciation on property and equipment we
expect to retire when a decision is made to abandon a location.
At February 1, 2014, and February 2, 2013, the obligation associated with location closings included in accrued liabilities in
our Consolidated Balance Sheets was $33 million and $83 million, respectively, and the obligation associated with location
closings included in long-term liabilities in our Consolidated Balance Sheets was $86 million and $149 million, respectively.
The obligation associated with location closings at February 1, 2014, and February 2, 2013, included amounts associated with
our restructuring activities as further described in Note 6, Restructuring Charges.
Leases
We conduct the majority of our retail and distribution operations from leased locations. The leases require payment of real
estate taxes, insurance and common area maintenance, in addition to rent. The terms of our new lease agreements for large-
format stores are generally less than 10 years, although we have existing leases with terms up to 20 years. Small-format stores
generally have lease terms that are half the length of large-format stores. Most of the leases contain renewal options and
escalation clauses, and certain store leases require contingent rents based on factors such as specified percentages of revenue or
the consumer price index.
For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a
straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference
between the straight-line rent amounts and amounts payable under the leases as part of deferred rent, in accrued liabilities or
long-term liabilities, as appropriate.
Cash or lease incentives received upon entering into certain store leases ("tenant allowances") are recognized on a straight-line
basis as a reduction to rent from the date we take possession of the property through the end of 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 1, 2014, and February 2, 2013, deferred rent included in accrued liabilities in our Consolidated Balance Sheets was
$36 million and $50 million, respectively, and deferred rent included in long-term liabilities in our Consolidated Balance Sheets
was $232 million and $289 million, respectively.
We also lease certain equipment under noncancelable operating and capital leases. In addition, we have financing leases for
which the gross cost of constructing the asset is included in property and equipment, and amounts reimbursed from the landlord
are recorded as financing obligations. Assets acquired under capital and financing 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. We
test goodwill for impairment annually, as of the first day of the fiscal fourth quarter, or when indications of potential
impairment exist. We monitor the existence of potential impairment indicators throughout the fiscal year. We test for goodwill
impairment at the reporting unit level. Our reporting units are the components of operating segments which constitute
businesses for which discrete financial information is available and is regularly reviewed by segment management. No
components were aggregated in arriving at our reporting units. Our reporting unit with a goodwill balance at the beginning of
fiscal 2014 was Best Buy Domestic.
We review goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the
fair value of the reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is
necessary to perform the two-step goodwill impairment test. If it is determined that it is not more likely than not that the fair