Dollar General 2011 Annual Report Download - page 162

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:
February 3, January 28,
(In thousands) 2012 2011
Compensation and benefits ......................... $ 76,989 $ 81,786
Insurance ...................................... 78,235 76,372
Taxes (other than taxes on income) ................... 107,953 74,900
Other ......................................... 133,898 114,683
$397,075 $347,741
Other accrued expenses primarily include the current portion of liabilities for legal settlements,
freight expense, contingent rent expense, interest, utilities, derivatives, and common area and other
maintenance charges.
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 (‘‘ARIC’’), 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 a merger transaction, in 2007 the Company recorded its assumed self-insurance
reserves at their present value in accordance with applicable accounting standards, using a discount rate
of 5.4%. The balance of the remaining discount was $3.3 million and $4.8 million at February 3, 2012
and January 28, 2011, 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
actually paid are reflected as a liability, with the current portion in Accrued expenses and other and the
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