Dollar General 2011 Annual Report Download - page 161

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Basis of presentation and accounting policies (Continued)
estimated based primarily upon estimated 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
$1.0 million in 2011, $1.7 million in 2010 and $5.0 million in 2009, to reduce the carrying value of
certain of its stores’ assets. Such action was deemed necessary based on the Company’s evaluation that
such amounts would not be recoverable primarily due to insufficient sales or excessive costs resulting in
negative current and projected future cash flows at these locations.
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 when indicators of
impairment are present, based on undiscounted cash flows, and if impaired, written down to fair value
based on either discounted cash flows or appraised values.
Goodwill and intangible assets with indefinite lives are tested for impairment annually or more
frequently if indicators of impairment are present and written down to fair value as required. No
impairment of intangible assets has been identified during any of the periods presented.
The goodwill impairment test is a two-step process that requires management to make judgments
in determining what assumptions to use in the calculation. The first step of the process consists of
estimating the fair value of the Company’s reporting unit based on valuation techniques (including a
discounted cash flow model using revenue and profit forecasts) and comparing that estimated fair value
with the recorded carrying value, which includes goodwill. If the estimated fair value is less than the
carrying value, a second step is performed to compute the amount of the impairment by determining
an ‘‘implied fair value’’ of goodwill. The determination of the implied fair value of goodwill would
require the Company to allocate the estimated fair value of its reporting unit to its assets and liabilities.
Any unallocated fair value would represent the implied fair value of goodwill, which would be
compared to its corresponding carrying value.
Other assets
Non-current Other assets consist primarily of qualifying prepaid expenses, debt issuance costs
which are amortized over the life of the related obligations, deferred compensation obligations, and
utility and security deposits.
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