Big Lots 2007 Annual Report Download - page 135

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1 — Summary of Significant Accounting Policies (Continued)
Property and Equipment — Net
Depreciation and amortization expense of property and equipment are recorded on a straight-line basis using
estimated service lives. Leasehold improvements are amortized on a straight-line basis using the shorter of their
estimated service lives or the lease term. When a decision is made to dispose of property and equipment prior to the
end of the previously estimated service life, depreciation estimates are revised prospectively to reflect the remaining
depreciation or amortization of the asset over the shortened estimated service life. The cost of assets sold or retired
and the related accumulated depreciation are removed from the accounts with any resulting gain or loss included in
selling and administrative expenses. Major repairs that extend service lives are capitalized. Maintenance and repairs
are charged to expense as incurred. Capitalized interest was not significant in any period presented.
The estimated service lives of property and equipment by major asset category were as follows:
Land improvements ........................................ 15years
Buildings ................................................. 40 years
Leasehold improvements .................................... 5 years
Store fixtures and equipment ................................. 5 years
Distribution and transportation fixtures and equipment ............ 5 - 15 years
Office and computer equipment ............................... 5 years
Computer software costs .................................... 3 - 7 years
Company vehicles .......................................... 3 years
Aircraft .................................................. 20 years
Impairment
Our long-lived assets primarily consist of property and equipment, net. In order to determine if impairment
indicators are present on store property and equipment, we review historical operating results at the store level.
Generally, all other property and equipment is reviewed for impairment at the enterprise level. Impairment is
recorded if impairment indicators are present and if the carrying values of the long-lived assets exceed their
anticipated undiscounted future net cash flows. Our assumptions related to estimates of future cash flows are
based on historical results of cash flows adjusted for management projections for future periods. We estimate
the fair value of our long-lived assets using readily available market information for similar assets.
Closed Store Accounting
We recognize an obligation for the fair value of lease termination costs when we cease using the leased property
in our operations. In measuring fair value of these lease termination obligations, we consider the remaining
minimum lease payments, estimated sublease rentals that could be reasonably obtained, and other potentially
mitigating factors. We discount the estimated obligation using the applicable credit adjusted interest rate,
resulting in accretion expense in periods subsequent to the period of initial measurement. We monitor the
estimated obligation for lease termination liabilities in subsequent periods and revise any estimated liabilities,
if necessary. Severance and benefits associated with terminating employees from employment are recognized
ratably from the communication date through the estimated future service period, unless the estimated future
service period is less than 60 days, in which case we recognize the impact at the communication date. Generally
all other store closing costs are recognized when incurred.
When material, we classify the results of operations of closed stores to discontinued operations when the
operations and cash flows of the stores have been (or will be) eliminated from ongoing operations and we no
longer have any significant continuing involvement in the operations associated with the stores after closure.
We generally meet the second criteria on all closed stores as, upon closure, operations cease and we have no
continuing involvement. To determine if cash flows have been (or will be) eliminated from ongoing operations,