Dillard's 2013 Annual Report Download - page 56

F-10
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 - 40 years
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 10 years
Properties leased by the Company under lease agreements which are determined to be capital leases are stated at an
amount equal to the present value of the minimum lease payments during the lease term, less accumulated amortization. The
properties under capital leases and leasehold improvements under operating leases are amortized on the straight-line method
over the shorter of their useful lives or the related lease terms. The provision for amortization of leased properties is included in
depreciation and amortization expense.
Included in property and equipment as of February 1, 2014 are assets held for sale in the amount of $10.4 million. During
fiscal 2013, 2012 and 2011, the Company realized gains on the disposal of property and equipment of $0.6 million, $12.4
million and $1.8 million, respectively.
Depreciation expense on property and equipment was $255 million, $260 million and $258 million for fiscal 2013, 2012
and 2011, respectively.
Long-Lived Assets—Impairment losses are required to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the
assets' carrying amount. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an
analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. This analysis is performed at the
store unit level. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to
its fair value. Various factors including future sales growth and profit margins are included in this analysis. Management
believes at this time that the carrying value and useful lives continue to be appropriate, after recognizing the impairment
charges recorded in fiscal 2013, 2012 and 2011, as disclosed in Note 14.
Other Assets—Other assets include investments accounted for by the equity and cost methods. The carrying values of
these investments were approximately $1.5 million and $9.2 million at February 1, 2014 and February 2, 2013, respectively.
These investments originally consisted of two shopping malls located in Denver, Colorado and Bonita Springs, Florida; one
property located in Toledo, Ohio; and an investment in Acumen Brands ("Acumen"), an eCommerce company based in
Fayetteville, Arkansas.
During fiscal 2013, the Company received proceeds of $15.7 million from the sale of its investment in Acumen, resulting
in a gain of $11.7 million that was recorded in gain on disposal of assets.
During fiscal 2013, the Company recorded a pretax asset impairment charge of $3.6 million for the write-down of its
investment in the Toledo, Ohio property.
During fiscal 2011, the Company sold its interest in the Denver, Colorado mall joint venture for $11.0 million, resulting
in a gain of $2.1 million that was recorded in gain on disposal of assets.
During fiscal 2011, the Company received a distribution of excess cash from a mall joint venture of $6.7 million and
recorded a related gain of $4.2 million in income on and equity in losses of joint ventures.
At February 1, 2014 and February 2, 2013, other assets also included the deferred charge related to the REIT Transaction
of $197.4 million and $202.4 million, respectively. Refer to Note 6 for a discussion of the REIT Transaction.
Vendor Allowances—The Company receives concessions from its vendors through a variety of programs and
arrangements, including cooperative advertising and margin maintenance programs. The Company has agreements in place
with each vendor setting forth the specific conditions for each allowance or payment. These agreements range in periods from a
few days to up to a year. If the payment is a reimbursement for costs incurred, it is offset against those related costs; otherwise,
it is treated as a reduction to the cost of the merchandise. Amounts of vendor concessions are recorded only when an agreement
has been reached with the vendor and the collection of the concession is deemed probable.
For cooperative advertising programs, the Company generally offsets the allowances against the related advertising
expense when incurred. Many of these programs require proof-of-advertising to be provided to the vendor to support the
reimbursement of the incurred cost. Programs that do not require proof-of-advertising are monitored to ensure that the
allowance provided by each vendor is a reimbursement of costs incurred to advertise for that particular vendor. If the allowance
exceeds the advertising costs incurred on a vendor-specific basis, then the excess allowance from the vendor is recorded as a
reduction of merchandise cost for that vendor.