Dollar General 2010 Annual Report Download - page 138

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Basis of presentation and accounting policies (Continued)
Accrued expenses and other liabilities
Accrued expenses and other consist of the following:
January 28, January 29,
(In thousands) 2011 2010
Compensation and benefits ......................... $ 81,786 $100,843
Insurance ...................................... 76,372 65,408
Taxes (other than taxes on income) ................... 74,900 72,902
Other ......................................... 114,683 103,137
$347,741 $342,290
Other accrued expenses primarily include the current portion of liabilities for legal settlements,
freight expense, contingent rent expense, interest, utilities, common area and other maintenance
charges, and income tax related reserves.
Insurance liabilities
The Company retains a significant portion of risk for its workers’ compensation, employee health,
general liability, property and automobile claim exposures. Accordingly, provisions are made for the
Company’s estimates of such risks. The undiscounted future claim costs for the workers’ compensation,
general liability, and health claim risks are derived using actuarial methods. To the extent that
subsequent claim costs vary from those estimates, future results of operations will be affected. Ashley
River Insurance Company (or ARIC, as defined above), a South Carolina-based wholly owned captive
insurance subsidiary of the Company, charges the operating subsidiary companies premiums to insure
the retained workers’ compensation and non-property general liability exposures. Pursuant to South
Carolina insurance regulations, ARIC is required to maintain certain levels of cash and cash
equivalents related to its self insured exposures. ARIC currently insures no unrelated third-party risk.
As a result of the Merger discussed in Note 3, the Company recorded its assumed self-insurance
reserves as of the Merger date at their present value in accordance with applicable accounting
standards for business combinations, using a discount rate of 5.4%. The balance of the resulting
discount was $4.8 million and $7.4 million at January 28, 2011 and January 29, 2010, respectively. Other
than for reserves assumed in a business combination, the Company’s policy is to record self-insurance
reserves on an undiscounted basis.
Operating leases and related liabilities
Rent expense is recognized over the term of the lease. The Company records minimum rental
expense on a straight-line basis over the base, non-cancelable lease term commencing on the date that
the Company takes physical possession of the property from the landlord, which normally includes a
period prior to the store opening to make necessary leasehold improvements and install store fixtures.
When a lease contains a predetermined fixed escalation of the minimum rent, the Company recognizes
the related rent expense on a straight-line basis and records the difference between the recognized
rental expense and the amounts payable under the lease as deferred rent. Tenant allowances, to the
extent received, are recorded as deferred incentive rent and are amortized as a reduction to rent
expense over the term of the lease. Any difference between the calculated expense and the amounts
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