Costco 2009 Annual Report Download - page 57

asset groups classified as held for sale (disposal group), the carrying value is compared to the disposal
group’s fair value less costs to sell. The Company estimates fair value by obtaining market appraisals
from third party brokers or other valuation techniques. In 2009 and 2008, the Company recorded
impairment charges of $11 and $10, respectively. For 2009, the charge was primarily related to the
closure of its two Costco Home locations in July 2009. For 2008, the charge was primarily related to a
warehouse that was demolished, rebuilt, and reopened in early 2009. No impairment charge for long-
lived assets was recorded in 2007.
Other Assets
Other assets consist of the following at the end of 2009 and 2008:
2009 2008
Investment in Costco Mexico .................................... $319 $364
Prepaid rents, lease costs, and long-term deposits .................. 170 167
Cash surrender value of life insurance ............................ 73 91
Goodwill, net ................................................. 71 74
Notes receivable .............................................. 56 59
Other ....................................................... 50 42
Long-term investments ......................................... 3 68
Other Assets ............................................. $742 $865
The Company’s investments in Costco Mexico, a 50%-owned joint venture, and in other
unconsolidated joint ventures that are less than majority owned are accounted for under the equity
method. The equity in earnings of Costco Mexico is included in interest income and other in the
accompanying consolidated statements of income, and for 2009, 2008 and 2007, was $32, $41, and
$33, respectively. The amount of retained earnings that represents undistributed earnings of Costco
Mexico was $266 and $234 at the end of 2009 and 2008, respectively. The investments and equity in
earnings of other unconsolidated joint ventures are not material. The Company did not make any
capital contributions to its investment in Costco Mexico in 2009, 2008, or 2007.
The Company adjusts the carrying value of its life insurance contracts to the net cash surrender value
at the end of each reporting period. The adjustment reflects changes in the net realizable value of the
employee life insurance contracts based largely on changes in investment assets underlying the
policies and is included in selling, general, and administrative expenses. The net realizable value of
these contracts is largely based on changes in investment assets underlying the policies and subject to
conditions generally affecting equity and debt markets. The adjustment to cash surrender value was a
decrement of $23 and $10 in 2009 and 2008, respectively, and a benefit of $6 in 2007. These amounts
are reflected in other non-cash items, net, in cash flows from operations in the accompanying
consolidated statements of cash flows.
Goodwill resulting from certain business combinations is reviewed for impairment in the fourth quarter
of each fiscal year, or more frequently if circumstances dictate. No impairment of goodwill has been
incurred to date.
Notes receivable generally represent amounts due from cities over a number of years representing
incentive amounts granted to the Company when a new location was opened, or for the repayment of
certain infrastructure initially paid for by the Company.
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