Big Lots 2008 Annual Report Download - page 120

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52
BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Rent Expense
Rent expense is recognized over the term of the lease and is included in selling and administrative expenses. We
recognize minimum rent starting when possession of the property is taken from the landlord, which normally
includes a construction period prior to store opening. When a lease contains a predetermined fixed escalation
of the minimum rent, we recognize the related rent expense on a straight-line basis and record the difference
between the recognized rental expense and the amounts payable under the lease as deferred incentive rent. We
also receive tenant allowances, which are recorded in deferred incentive rent and are amortized as a reduction to
rent expense over the term of the lease.
Our leases generally obligate us for our applicable portion of real estate taxes, CAM, and property insurance
that has been incurred by the landlord with respect to the leased property. We maintain accruals for our
estimated applicable portion of real estate taxes, CAM, and property insurance incurred but not settled at each
reporting date. We estimate these accruals based on historical payments made and take into account any known
trends. Inherent in these estimates is the risk that actual costs incurred by landlords and the resulting payments
by us may be higher or lower than the amounts we have recorded on our books.
Certain of our leases provide for contingent rents that are not measurable at the lease inception date. Contingent
rent includes rent based on a percentage of sales that are in excess of a predetermined level. Contingent rent is
excluded from minimum rent and is included in the determination of total rent expense when it is probable that
the expense has been incurred and the amount is reasonably estimable.
Advertising Expense
Advertising costs are expensed as incurred, consist primarily of print and television advertisements, and are
included in selling and administrative expenses. Advertising expenses were $102.3 million, $104.1 million, and
$105.4 million for 2008, 2007, and 2006, respectively.
Earnings per Share
Basic earnings per share is based on the weighted-average number of shares outstanding during each period.
Diluted earnings per share is based on the weighted-average number of shares outstanding during each period
and the additional dilutive effect of stock options and nonvested restricted stock awards, calculated using the
treasury stock method.
Store Pre-opening Costs
Pre-opening costs incurred during the construction periods for new store openings are expensed as incurred.
Guarantees
We have lease guarantees which were issued prior to January 1, 2003. We record a liability for these lease
guarantees in the period when it becomes probable that the obligor will fail to perform its obligation and if the
amount of our guarantee obligation is estimable.
Other Comprehensive Income
Prior to 2007, our comprehensive income was equal to net income. Beginning in 2007, we reported Other
Comprehensive Income on our consolidated statement of shareholders’ equity. Our Other Comprehensive
Income includes principally the impact of the amortization of our pension actuarial loss, net of tax, and the
revaluation of our pension actuarial loss, net of tax.
Note 1 — Summary of Significant Accounting Policies (Continued)