CVS 2015 Annual Report Download - page 63

61
2015 Annual Report
The activity in the allowance for doubtful accounts receivable for the years ended December 31 is as follows:
IN MILLIONS 2015 2014 2013
Beginning balance $ 256 $ 256 $ 243
Additions charged to bad debt expense
216 185 195
Write-offs charged to allowance
(311) (185) (182)
Ending balance
$ 161 $ 256 $ 256
Inventories All inventories are stated at the lower of cost or market. Prescription drug inventories in the RLS and
PSS, as well as front store inventories in the RLS stores are accounted for using the weighted average cost method.
See Note 2, “Changes in Accounting Principle.” Physical inventory counts are taken on a regular basis in each retail
store and long-term care pharmacy and a continuous cycle count process is the primary procedure used to validate
the inventory balances on hand in each distribution center and mail facility to ensure that the amounts reflected in
the accompanying consolidated financial statements are properly stated. During the interim period between physical
inventory counts, the Company accrues for anticipated physical inventory losses on a location-by-location basis
based on historical results and current trends.
Property and equipment Property, equipment and improvements to leased premises are depreciated using the
straight-line method over the estimated useful lives of the assets, or when applicable, the term of the lease, which-
ever is shorter. Estimated useful lives generally range from 10 to 40 years for buildings, building improvements and
leasehold improvements and 3 to 10 years for fixtures, equipment and internally developed software. Repair 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. Application development stage costs for signifi-
cant internally developed software projects are capitalized and depreciated.
The following are the components of property and equipment at December 31:
IN MILLIONS 2015 2014
Land $ 1,635 $ 1,506
Building and improvements
3,168 2,828
Fixtures and equipment
10,001 8,958
Leasehold improvements
4,015 3,626
Software
2,217 1,868
21,036 18,786
Accumulated depreciation and amortization
(11,181) (9,943)
Property and equipment, net
$ 9,855 $ 8,843
The gross amount of property and equipment under capital leases was $528 million and $268 million as of
December 31, 2015 and 2014, respectively. Accumulated amortization of property and equipment under capital
lease was $97 million and $86 million as of December 31, 2015 and 2014, respectively. Amortization of property and
equipment under capital lease is included within depreciation expense. Depreciation expense totaled $1.5 billion in
2015 and $1.4 billion in both 2014 and 2013.
Goodwill and other indefinitely-lived assets Goodwill and other indefinitely-lived assets are not amortized, but
are subject to impairment reviews annually, or more frequently if necessary. See Note 4 for additional information on
goodwill and other indefinitely-lived assets.
Intangible assets Purchased customer contracts and relationships are amortized on a straight-line basis over
their estimated useful lives between 9 and 20 years. 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 4 for additional information about intangible assets.