Kroger 2012 Annual Report Download - page 103

A-45
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
In 2012, the Company acquired an interest in one of its suppliers and all the outstanding shares of Axium
Pharmacy, a leading specialty pharmacy that provides specialized drug therapies and support services for
patients with complex medical conditions, resulting in combined additional goodwill of $96.
Testing for impairment must be performed annually, or on an interim basis upon the occurrence of
a triggering event or a change in circumstances that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. The annual evaluation of goodwill performed during the fourth
quarter of 2012 and 2011 did not result in impairment.
The annual evaluation of goodwill performed during the fourth quarter of 2010 resulted in an
impairment charge of $18. Based on the results of the Company’s step one analysis in the fourth quarter of
2010, a supermarket reporting unit with a small number of stores indicated potential impairment. Due to
estimated future expected cash flows being lower than in the past, the estimated fair value of the reporting
unit decreased. Management concluded that the carrying value of goodwill for this reporting unit exceeded
its implied fair value, resulting in a pre-tax impairment charge of $18 ($12 after-tax). In 2009, the Company
disclosed that a 10% reduction in fair value of this supermarket reporting unit would indicate a potential for
impairment. Subsequent to the impairment, no goodwill remains at this reporting unit.
Based on current and future expected cash flows, the Company believes goodwill impairments are not
reasonably possible. A 10% reduction in fair value of the Company’s reporting units would not indicate a
potential for impairment of the Company’s remaining goodwill balance.
3 . P R O P E R T Y , PL A N T A N D E Q U I P M E N T , NE T
Property, plant and equipment, net consists of:
2012 2011
Land ...................................................... $ 2,450 $ 2,253
Buildings and land improvements .............................. 8,276 7,799
Equipment ................................................. 10,267 10,110
Leasehold improvements ..................................... 6,545 6,119
Construction-in-progress ..................................... 1,239 1,202
Leased property under capital leases and financing obligations ....... 593 588
Total property, plant and equipment .......................... 29,370 28,071
Accumulated depreciation and amortization ...................... (14,495) (13,607)
Property, plant and equipment, net ........................... $ 14,875 $ 14,464
Accumulated depreciation for leased property under capital leases was $321 at February 2, 2013 and
$327 at January 28, 2012.
Approximately $236 and $220, original cost, of Property, Plant and Equipment collateralized certain
mortgages at February 2, 2013 and January 28, 2012, respectively.