CVS 2004 Annual Report Download - page 35
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Please find page 35 of the 2004 CVS 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.Following are the components of property and equipment
included in the consolidated balance sheets as of the respective
balance sheet dates:
JAN. 1,JAN. 3,
In millions 2005 2004
Land $ 262.6 $ 180.7
Building and improvements 612.6 492.8
Fixtures and equipment 2,943.8 2,123.3
Leasehold improvements 1,286.5 1,012.8
Capitalized software 168.2 149.5
Capital leases 1.3 1.3
5,275.0 3,960.4
Accumulated depreciation
and amortization (1,769.1) (1,418.3)
$ 3,505.9 $ 2,542.1
In accordance with Statement of Position No. 98-1, “Accounting
for the Costs of Computer Software Developed or Obtained
for Internal Use,” the Company capitalizes application stage
development costs for significant internally developed software
projects. These costs are amortized over a five-year period.
Unamortized costs were $78.6 million as of January 1, 2005
and $90.6 million as of January 3, 2004.
Impairment of long-lived assets–The Company groups and
evaluates fixed and intangible assets excluding goodwill, for
impairment at the individual store level, which is the lowest
level at which individual cash flows can be identified. When
evaluating assets for potential impairment, the Company
first compares the carrying amount of the asset to the asset’s
estimated future cash flows (undiscounted and without interest
charges). If the estimated future cash flows used in this analysis
are less than the carrying amount of the asset, an impairment
loss calculation is prepared. The impairment loss calculation
compares the carrying amount of the asset to the asset’s
estimated future cash flows (discounted and with interest
charges). If the carrying amount exceeds the asset’s estimated
future cash flows (discounted and with interest charges), the
loss is allocated to the long-lived assets of the group on a pro
rata basis using the relative carrying amounts of those assets.
Goodwill–The Company accounts for goodwill and intangibles
under SFAS No. 142, “Goodwill and Other Intangible Assets.”
As such, goodwill and other indefinite-lived assets are not
amortized, but are subject to annual impairment reviews.
See Note 3 for further information on goodwill.
Intangible assets–Purchased customer lists are amortized on
a straight-line basis over their estimated useful lives of up to
10 years. Purchased leases are amortized on a straight-line basis
over the remaining life of the lease. See Note 3 for further
information on intangible assets.
Revenue recognition–The Company recognizes revenue
from the sale of merchandise at the time the merchandise is
sold. Service revenue from the Company’s pharmacy benefit
management segment, which is recognized using the net
method under Emerging Issues Task Force (“EITF”) No. 99-19,
“Reporting Revenue Gross as a Principal Versus Net as an
Agent,” is recognized at the time the service is provided. Service
revenue totaled $129.3 million in 2004, $96.0 million in 2003
and $84.9 million in 2002. The Company offers sales incentives
that entitle customers to receive a reduction in the price of a
product or service. For sales incentives in which the Company
is the obligor, the reduction in revenue is recognized at the time
the product or service is sold. Customer returns are immaterial.
Vendor allowances–The Company accounts for vendor
allowances under the guidance provided by EITF Issue No. 02-
16, “Accounting by a Reseller for Cash Consideration Received
from a Vendor” and EITF Issue No. 03-10, “Application of EITF
Issue No. 02-16,
‘
Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor,’ by Resellers
to Sales Incentives Offered to Consumers by Manufacturers.”
Vendor allowances reduce the carrying cost of inventory unless
they are specifically identified as a reimbursement for promotional
programs and/or other services provided. Funds that are directly
linked to advertising commitments are recognized as a reduction
of advertising expense in the selling, general and administrative
expenses line when the related advertising commitment is
satisfied. Any such allowances received in excess of the actual
cost incurred also reduce the carrying cost of inventory. The
total value of any upfront payments received from vendors that
are linked to purchase commitments is initially deferred. The
deferred amounts are then amortized to reduce cost of goods
sold over the life of the contract based upon purchase volume.
The total value of any upfront payments received from vendors
that are not linked to purchase commitments is also initially
deferred. The deferred amounts are then amortized to reduce
cost of goods sold on a straight-line basis over the life of
the related contract. The total amortization of these upfront
payments was not material to the accompanying consolidated
financial statements.
Store opening and closing costs–New store opening costs, other
than capital expenditures, are charged directly to expense when
incurred. When the Company closes a store, the present value
of estimated unrecoverable costs, including the remaining lease
obligation less estimated sublease income and the book value
of abandoned property and equipment, are charged to expense.
Insurance–The Company is self-insured for certain losses
related to general liability, workers’ compensation and
automobile liability. The Company obtains third party insurance
coverage to limit exposure from these claims. The Company’s
self-insurance accruals, which include reported claims and
claims incurred but not reported, are calculated using standard
CVS Corporation 2004 Annual Report | 33