Costco 2010 Annual Report Download - page 69

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Maturities of long-term debt during the next five fiscal years and thereafter are as follows:
2011 ........................................................ $ 0
2012 ........................................................ 899
2013 ........................................................ 0
2014 ........................................................ 0
2015 ........................................................ 0
Thereafter ................................................... 1,242
Total .................................................... $2,141
Note 5—Leases
Operating Leases
The Company leases land and/or buildings at warehouses and certain other office and distribution
facilities primarily under operating leases. These leases expire at various dates through 2049, with the
exception of one lease in the Company’s United Kingdom subsidiary, which expires in 2151. These
leases generally contain one or more of the following options which the Company can exercise at the
end of the initial lease term: (a) renewal of the lease for a defined number of years at the then-fair
market rental rate or rate stipulated in the lease agreement; (b) purchase of the property at the then-
fair market value; or (c) right of first refusal in the event of a third party purchase offer.
The Company accounts for its lease expense with free rent periods and step-rent provisions on a
straight-line basis over the original term of the lease, from the date the Company has control of the
property. Certain leases provide for periodic rental increases based on the price indices, and some of
the leases provide for rents based on the greater of minimum guaranteed amounts or sales volume.
Contingent rents have not been material.
The aggregate rental expense and sublease income, related to certain of its operating lease
arrangements, for 2010, 2009 and 2008 are as follows:
Aggregate
rental
expense
Sublease
income(1)
2010 .............................................. $187 $10
2009 .............................................. 177 10
2008 .............................................. 167 10
(1) Included in interest income and other
Capital Leases
The Company has entered into four capital leases for warehouse locations. Capital lease liabilities
were recorded at the lesser of the estimated fair market value of the leased property or the net present
value of the aggregate future minimum lease payments. These leases expire at various dates through
2040.
Gross assets recorded under these leases were $169 and $77, at the end of 2010 and 2009,
respectively. These assets, net of accumulated amortization of $7 and $1 at the end of 2010 and 2009,
respectively, are included in buildings and improvements in the accompanying consolidated balance
sheets. Amortization expense on capital lease assets is recorded as depreciation expense and is
included in selling, general and administrative expenses.
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