CarMax 2015 Annual Report Download - page 51

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(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 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. 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, 2015 and February 28, 2014. 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 2015, 2014 or 2013.
Restricted Cash on Deposit in Reserve Accounts. The restricted cash on deposit in reserve accounts is for the benefit
of holders of non-recourse notes payable, and these funds are not expected to be available to the company or its
creditors. 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. Restricted cash on deposit in reserve accounts is invested in money market securities and was
$42.7 million as of February 28, 2015, and $32.5 million as of February 28, 2014.
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 $52.4 million as of February 28, 2015, and
$40.2 million as of February 28, 2014.
(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 their estimated useful lives,
generally 25 years. Payments on the leases are recognized as interest expense and a reduction of the obligations. In
the event the leases are modified or extended beyond the original lease term, the related finance lease obligation is
increased based on the present value of the revised future minimum lease payments on the date of the modification,
with a corresponding increase to the net carrying amount of the assets subject to these transactions. See Notes 11 and
15 for additional information on finance lease obligations.
(M) Accrued Expenses
As of February 28, 2015 and February 28, 2014, accrued expenses and other current liabilities included accrued
compensation and benefits of $148.4 million and $120.7 million, respectively; loss reserves for general liability and
workers’ compensation insurance of $36.7 million and $29.7 million, respectively; and the current portion of
cancellation reserves. See Note 8 for additional information on cancellation reserves.
(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