Costco 2012 Annual Report Download - page 54

Repair and maintenance costs are expensed when incurred. Expenditures for remodels,
refurbishments and improvements that add to or change the way an asset functions or that extend the
useful life of an asset are capitalized. Assets that were removed during the remodel, refurbishment or
improvement are retired. Assets classified as held for sale were not material at the end of 2012 or
2011.
The Company evaluates long-lived assets for impairment on an annual basis, when relocating or
closing a facility, or when events or changes in circumstances occur that may indicate the carrying
amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset
groups held and used, including warehouses to be relocated, the carrying value of the asset group is
considered recoverable when the estimated future undiscounted cash flows generated from the use
and eventual disposition of the asset group exceed the group’s net carrying value. In the event that the
carrying value is not considered recoverable, an impairment loss would be recognized for the asset
group to be held and used equal to the excess of the carrying value above the estimated fair value of
the asset group. For 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. Impairment
charges, included in selling, general and administrative expenses on the consolidated statements of
income, in 2012, 2011, and 2010 were immaterial.
Software Costs
The Company capitalizes certain computer software and software development costs incurred in
connection with developing or obtaining computer software for internal use. These costs are included
in property, plant, and equipment and amortized on a straight-line basis over the estimated useful lives
of the software, generally three to seven years.
Other Assets
Other assets consist of the following at the end of 2012 and 2011:
2012 2011
Prepaid rents, lease costs, and long-term deposits .................. $230 $211
Receivables from governmental entities ........................... 225 216
Cash surrender value of life insurance ............................ 76 71
Goodwill, net ................................................. 66 74
Other ....................................................... 56 51
Other Assets ............................................. $653 $623
Receivables from governmental entities largely consists of various tax related items including amounts
deposited with taxing authorities in connection with ongoing income tax audits and long term deferred
tax assets. The Company adjusts the carrying value of its employee life insurance contracts to the net
cash surrender value at the end of each reporting period. 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.
Accounts Payable
The Company’s banking system provides for the daily replenishment of major bank accounts as
checks are presented. Included in accounts payable at the end of 2012 and 2011 are $565 and $108,
respectively, representing the excess of outstanding checks over cash on deposit at the banks on
which the checks were drawn.
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