LensCrafters 2008 Annual Report Download - page 63

Maintenance and repair expenses are expensed as incurred. Upon the sale or disposition of property and
equipment, the cost of the asset and the related accumulated depreciation and leasehold amortization are
removed from the accounts and any resulting gain or loss is included in the consolidated statement of
income.
Capitalized leased property. Capitalized leased assets are amortized using the straight-line method over
the term of the lease, or in accordance with practices established for similar owned assets if ownership
transfers to the Company at the end of the lease term.
Goodwill. Goodwill represents the excess of the purchase price (including acquisition-related expenses)
over the value assigned to the net tangible and identifiable intangible assets acquired. The Company’s
goodwill is tested annually for impairment as of December 31 of each year in accordance with SFAS No.
142,
Goodwill and Other Intangible Assets (“SFAS 142”). Additional impairment tests are performed if, for
any reason, the Company believes that an event has occurred that may impair goodwill. Such tests are
performed at the reporting unit level which consists of four units, Wholesale, Retail North America, Retail
Asia Pacific and Retail Other, as required by the provisions of SFAS 142. For the fiscal years 2008, 2007, and
2006 the Company did not recognize any goodwill impairment charge.
Trade names and other intangibles. In connection with various acquisitions, Luxottica Group has
recorded as intangible assets certain trade names and other intangibles which the Company believes have
a finite life. Trade names are amortized on a straight-line basis over periods ranging from 20 to 25 years
(see Note 7). Other intangibles include, among other items, distributor networks, customer lists and
contracts, franchise agreements and license agreements, and are amortized over the respective useful
lives. All intangibles are subject to impairment testing in accordance with SFAS No. 144,
Accounting for
the Impairment or Disposal of Long-Lived Assets
(“SFAS 144”). Aggregate amortization expense of trade
names and other intangibles for the fiscal years 2008, 2007 and 2006 was Euro 73.9 million, Euro 69.5
million and Euro 68.8 million, respectively.
Impairment of long-lived assets. Luxottica Group’s long-lived assets, other than goodwill, are tested for
impairment whenever events or changes in circumstances indicate that the net carrying amount may not
be recoverable. When such events occur, the Company measures impairment by comparing the carrying
value of the long-lived asset to the estimated undiscounted future cash flows expected to result from the
use of the long-lived assets and their eventual disposition. If the sum of the expected undiscounted future
cash flows is less than the carrying amount of the long-lived assets, the Company records an impairment
loss, if determined to be necessary. Such impairment loss is measured as the amount by which the carrying
amount of the long-lived asset exceeds the fair value in accordance with SFAS 144. The aggregate
impairment loss on certain non-performing long-lived assets charged to the consolidated statements of
income during fiscal years 2008, 2007 and 2006 was not material.
Store opening and closing costs. Store opening costs are charged to operations as incurred in
accordance with Statement of Position No. 98-5,
Accounting for the Cost of Start-up Activities . The costs
associated with closing stores or facilities are recorded at fair value as such costs are incurred. Store closing
costs charged to the consolidated statements of income during fiscal years 2008, 2007 and 2006 were not
material.
Self insurance. The Company is self insured for certain losses relating to workers’ compensation, general
liability, auto liability, and employee medical benefits for claims filed and for claims incurred but not
reported. The Company’s liability is estimated on an undiscounted basis using historical claims experience
and industry averages; however, the final cost of the claims may not be known for over five years. As of
December 31, 2008 and 2007, self insurance accruals were Euro 43.2 million and Euro 40.9 million,
respectively.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS |61 <