Dollar General 2013 Annual Report Download - page 136

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Basis of presentation and accounting policies (Continued)
Other accrued expenses primarily include the current portion of liabilities for interest expense,
legal settlements, freight expense, utilities, 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 and are recorded as
self-insurance reserves pursuant to Company policy. To the extent that subsequent claim costs vary from
those estimates, future results of operations will be affected as the reserves are adjusted.
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.
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
long-term portion in Other liabilities in the consolidated balance sheets, and totaled approximately
$49.5 million and $43.6 million at January 31, 2014 and February 1, 2013, respectively.
The Company recognizes contingent rental expense when the achievement of specified sales targets
are considered probable. The amount expensed but not paid as of January 31, 2014 and February 1,
2013 was approximately $6.0 million and $7.7 million, respectively, and is included in Accrued expenses
and other in the consolidated balance sheets.
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10-K