Express 2014 Annual Report Download - page 41

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Description of Policy Judgments and Uncertainties
Effect if Actual Results Differ
from Assumptions
Inventories
Inventories are principally valued at
the lower of cost or market on a
weighted- average cost basis. We
record a lower of cost or market
reserve for our inventories if the cost
of specific inventory items on hand
exceeds the amount we expect to
realize from the ultimate sale or
disposal of the inventory.
We also record an inventory
shrinkage reserve calculated as a
percentage of cost of sales for
estimated merchandise losses for the
period between the last physical
inventory count and the balance sheet
date. These estimates are based on
historical results and can be affected
by changes in merchandise mix and/
or changes in shrinkage trends.
Our accounting methodology for
determining the lower of cost or
market reserve contains
uncertainties because it requires
management to make
assumptions and estimates that
are based on factors such as
merchandise seasonality,
historical trends, and estimated
inventory levels, including sell-
through of remaining units.
Our accounting methodology for
estimating the inventory
shrinkage reserve contains
uncertainty as it requires
management to make the
assumption that future shrink
results will follow the pattern of
previous physical inventory
losses.
We have not made any material
changes in the accounting
methodology used to determine
the lower of cost or market or
shrinkage reserve over the past
three years.
We have no reason to believe that
there will be a material change in
the future estimates or
assumptions we use to measure
the lower of cost or market or
shrinkage reserve. However, if
actual results are not consistent
with our estimates or
assumptions, we may be exposed
to losses or gains that could be
material.
A 10% increase or decrease in the
lower of cost or market
adjustment would not have had a
significant impact on the
inventory balance or pre-tax
income as of and for the year
ended January 31, 2015.
A 10% increase or decrease in the
inventory shrinkage reserve
balance would not have had a
significant impact on the reserve
balance or pre-tax income as of
and for the year ended
January 31, 2015.
Intangible Assets
Intangible assets with indefinite lives,
primarily tradenames, are reviewed
for impairment annually in the fourth
quarter and may be reviewed more
frequently if indicators of impairment
are present. The impairment review is
performed by assessing qualitative
factors to determine whether it is
more likely than not that the fair
value of the asset is less than its
carrying amount.
Our consideration of indefinite
lived intangible assets for
impairment requires judgments
surrounding future operating
performance, economic
conditions, and business plans,
among other factors.
There are inherent uncertainties
related to our qualitative
assessment and, if actual results
are not consistent with our
estimates or assumptions, we may
be exposed to impairment losses
that could be material.
37