Express 2014 Annual Report Download - page 42

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Description of Policy Judgments and Uncertainties
Effect if Actual Results Differ
from Assumptions
Leasehold Improvements
Leasehold improvements are
reviewed for impairment if indicators
of impairment are present. The
impairment review is performed at
the store level by comparing the
carrying value of the asset to the
undiscounted cash flows derived
from the asset group. If the
undiscounted cash flows of the asset
are less than the carrying value of the
respective asset group, then the
carrying value is compared to the
estimated fair value as determined
using the discounted store cash flows,
and a loss is recognized for the
difference.
Our analysis of leasehold
improvements for impairment
requires judgment surrounding
identification of appropriate
triggering events. This judgment
can be affected by factors such as
future store results, real estate
demand, and economic conditions
that can be difficult to predict.
We have not made any material
changes in the triggering events
used to evaluate our leasehold
improvements for impairment
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 in this
evaluation. However, if we
become aware of additional
triggering events or if triggering
events that we are not currently
using are added, there is potential
that additional stores could be
required to be tested for
impairment and could be
impaired.
Claims and Contingencies
We are subject to various claims and
contingencies related to legal,
regulatory, and other matters arising
out of the normal course of business.
Our determination of the treatment of
claims and contingencies in our
Consolidated Financial Statements is
based on management’s view of the
expected outcome of the applicable
claim or contingency. Management
may also use outside legal advice on
matters related to litigation to assist
in the estimating process.
We accrue a liability if the likelihood
of an adverse outcome is probable
and the amount is reasonably
estimable. We re- evaluate these
assessments on a quarterly basis or as
new material information becomes
available to determine whether a
liability should be established or if
any existing liability should be
adjusted.
Our liability for claims and
contingencies contains
uncertainties because the eventual
outcome will result from future
events. Additionally, the
determination of current accruals
requires estimates and judgments
related to future changes in facts
and circumstances, differing
interpretations of the law,
assessments of the amount of
damages, and the effectiveness of
strategies or other factors beyond
our control.
We have not made any material
changes in the accounting
methodology used to establish our
liability for claims and
contingencies over the past three
years.
We have no reason to believe that
there will be a material change in
our accrual or the assumptions we
use to establish the accrual for
claims and contingencies.
However, if actual results are not
consistent with our estimates or
expectations of the eventual
outcomes of cases, we may be
exposed to gains or losses that
could be material and our cash
flow could be materially impacted.
38