Family Dollar 2012 Annual Report Download - page 51

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depreciation is over the shorter of the term of the related lease (generally five or ten years) or the asset’s useful
economic life.
Estimated useful lives are as follows:
Buildings and building improvements ................................. 5-40 years
Furniture, fixtures and equipment .................................... 3-10 years
Transportation equipment ........................................... 3-10 years
Leasehold improvements ........................................... 5-10 years
The Company capitalizes certain costs incurred in connection with developing, obtaining and implementing
software for internal use. Capitalized costs are amortized over the expected economic life of the assets, generally
ranging from three to eight years.
Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Historically, impairment losses on fixed assets, which
typically relate to normal store closings, have not been material to the Company’s financial position or results of
operations.
Capitalized interest
The Company capitalizes interest on borrowed funds during the construction of property and equipment. The
Company capitalized $4.0 million, $0.6 million and $0.8 million of interest costs during fiscal 2012, fiscal 2011
and fiscal 2010, respectively.
Revenues
The Company recognizes revenue, net of returns and sales tax, at the time the customer tenders payment for and
takes possession of the merchandise.
Cost of sales
Cost of sales includes the purchase cost of merchandise and transportation costs to the Company’s distribution
centers and stores. Buying, distribution center and occupancy costs, including depreciation, are not included in
cost of sales. As a result, cost of sales may not be comparable to those of other retailers that may include these
costs in their cost of sales.
Selling, general and administrative expenses
All operating costs, except transportation costs to the Company’s distribution centers and stores, are included in
selling, general, and administrative expenses (“SG&A”). Buying, distribution center and occupancy costs,
including depreciation, are included in SG&A rather than cost of sales.
Insurance liabilities
The Company is primarily self-insured for health care, property loss, workers’ compensation, general liability,
and auto liability costs. These liabilities are based on the total estimated costs of claims filed and estimates of
claims incurred but not reported, less amounts paid against such claims, and are not discounted.
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