CarMax 2013 Annual Report Download - page 50

(J) Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and
amortization are calculated using the straight-line method over the shorter of the asset’s estimated useful life or the
lease term, if applicable. Property held under capital lease is stated at the lesser of the present value of the future
minimum lease payments at the inception of the lease or fair value. Amortization of capital lease assets is computed
on a straight-line basis over the shorter of the initial lease term or the estimated useful life of the asset and is
included in depreciation expense. Costs incurred during new store construction are capitalized as construction-in-
progress and reclassified to the appropriate fixed asset categories when the store is completed.
ESTIMATED USEFUL LIVES
Life
Buildings 25 years
Capital lease 20 years
Leasehold improvements 8 – 15 years
Furniture, fixtures and equipment 3 – 15 years
We review long-lived assets for impairment when events or changes in circumstances indicate the carrying amount
of an asset may not be recoverable. We recognize impairment when the sum of undiscounted estimated future cash
flows expected to result from the use of the asset is less than the carrying value of the asset. We recognized an
impairment of $0.2 million in fiscal 2012 related to assets within land held for sale. There was no impairment of
long-lived assets in fiscal 2013 or fiscal 2011. See Note 7 for additional information on property and equipment.
(K) Other Assets
Goodwill and Intangible Assets. Goodwill and other intangibles had a carrying value of $10.1 million as of
February 28, 2013 and February 29, 2012. We review goodwill and intangible assets for impairment annually or
when circumstances indicate the carrying amount may not be recoverable. No impairment of goodwill or intangible
assets resulted from our annual impairment tests in fiscal 2013, fiscal 2012 or fiscal 2011.
Restricted Cash on Deposit in Reserve Accounts. The restricted cash on deposit in reserve accounts is for the
benefit of the securitization investors. In the event that the cash generated by the securitized receivables in a given
period was insufficient to pay the interest, principal and other required payments, the balances on deposit in the
reserve accounts would be used to pay those amounts. These funds are restricted for the benefit of holders of non-
recourse notes payable and are not expected to be available to the company or its creditors. Restricted cash on
deposit in reserve accounts was $41.3 million as of February 28, 2013, and $45.3 million as of February 29, 2012.
Restricted Investments. Restricted investments includes money market securities primarily held to satisfy certain
insurance program requirements, as well as mutual funds held in a rabbi trust established to fund informally our
executive deferred compensation plan. Restricted investments totaled $35.0 million as of February 28, 2013, and
$31.4 million as of February 29, 2012.
(L) Finance Lease Obligations
We generally account for sale-leaseback transactions as financings. Accordingly, we record certain of the assets
subject to these transactions on our consolidated balance sheets in property and equipment and the related sales
proceeds as finance lease obligations. Depreciation is recognized on the assets over 25 years. Payments on the
leases are recognized as interest expense and a reduction of the obligations. See Notes 10 and 14 for additional
information on finance lease obligations.
(M) Other Accrued Expenses
As of February 28, 2013 and February 29, 2012, accrued expenses and other current liabilities included accrued
compensation and benefits of $103.4 million and $87.9 million, respectively, and loss reserves for general liability
and workers’ compensation insurance of $26.6 million and $23.0 million, respectively.
(N) Defined Benefit Plan Obligations
The recognized funded status of defined benefit retirement plan obligations is included both in accrued expenses and
other current liabilities and in other liabilities. The current portion represents benefits expected to be paid from our
benefit restoration plan over the next 12 months. The defined benefit retirement plan obligations are determined by
independent actuaries using a number of assumptions provided by CarMax. Key assumptions used in measuring the
plan obligations include the discount rate, rate of return on plan assets and mortality rate. See Note 8 for additional
information on our benefit plans.
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