Dollar General 2007 Annual Report Download - page 67

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65
Property and equipment
Property and equipment are recorded at cost. The Company provides for depreciation
and amortization on a straight-line basis over the following estimated useful lives:
Land improvements 20
Buildings 39-40
Furniture, fixtures and equipment 3-10
Improvements of leased properties are amortized over the shorter of the life of the
applicable lease term or the estimated useful life of the asset.
Impairment of long-lived assets
When indicators of impairment are present, the Company evaluates the carrying value of
long-lived assets, other than goodwill, in relation to the operating performance and future cash
flows or the appraised values of the underlying assets. In accordance with SFAS 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews for
impairment stores open more than two years for which current cash flows from operations are
negative. Impairment results when the carrying value of the assets exceeds the undiscounted
future cash flows over the life of the lease. The Company’ s estimate of undiscounted future cash
flows over the lease term is based upon historical operations of the stores and estimates of future
store profitability which encompasses many factors that are subject to variability and difficult to
predict. If a long-lived asset is found to be impaired, the amount recognized for impairment is
equal to the difference between the carrying value and the asset’ s fair value. The fair value is
estimated based primarily upon future cash flows (discounted at the Company’ s credit adjusted
risk-free rate) or other reasonable estimates of fair market value. Assets to be disposed of are
adjusted to the fair value less the cost to sell if less than the book value.
The Company recorded impairment charges included in SG&A expense of approximately
$0.2 million in the 2007 Predecessor period, $9.4 million in 2006 and $0.6 million in 2005 to
reduce the carrying value of certain of its stores’ assets as deemed necessary due to negative
sales trends and cash flows at these locations. The majority of the 2006 charges were recorded
pursuant to certain strategic initiatives discussed in Note 3.
Goodwill and other intangible assets
The Company amortizes intangible assets over their estimated useful lives unless such
lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on
undiscounted cash flows, and, if impaired, written down to fair value based on either discounted
cash flows or appraised values. Intangible assets with indefinite lives are tested annually for
impairment and written down to fair value as required. No impairment of intangible assets has
been identified during any of the periods presented.