Macy's 2008 Annual Report Download - page 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company expects to pay out the accrued severance costs, which are included in accounts payable and
accrued liabilities on the Consolidated Balance Sheets, prior to May 2, 2009.
In January 2009, the Company announced the closure of 11 underperforming Macy’s stores. In connection
with this announcement and the plan to dispose of these locations, the Company incurred $11 million of store
closing related costs during 2008. Of the $11 million of store closing related costs incurred in 2008,
approximately $7 million relates to lease obligations and other store liabilities and approximately $4 million
relates to severance costs.
The following table shows for 2008, the beginning and ending balance of, and the activity associated with,
the severance accrual established in connection with the store closings announced in January 2009:
February 2, 2008
Charged
To Store
Closing Related
Costs Payments January 31, 2009
(millions)
Severance costs ............................. $– $4 $– $4
The Company expects to pay out the accrued severance costs, which are included in accounts payable and
accrued liabilities on the Consolidated Balance Sheets, prior to May 2, 2009.
3. Asset Impairment Charges
Asset impairment charges in 2008 includes $96 million related to properties held and used, $40 million
related to store closings announced in January 2009, $63 million associated with acquired indefinite lived private
brand tradenames and $12 million associated with marketable securities.
Long-lived assets held for use are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-
lived assets is based on an estimate of undiscounted future cash flows resulting from the use of those assets in
operation. Measurement of an impairment loss for long-lived assets that management expects to hold and use is
based on the fair value of the asset. When an impairment loss is recognized, the carrying amount of the asset is
reduced to its estimated fair value. As a result of the Company’s projected undiscounted future cash flows related
to certain store locations being less than the carrying value of those assets, the Company recorded an impairment
charge of $96 million. The fair values of these locations were determined based on prices of similar assets.
In January 2009, the Company announced the closure of 11 underperforming Macy’s stores. In connection
with this announcement and the plan to dispose of these locations, the Company recorded $40 million of asset
impairment charges. The fair values of the locations to be disposed of were determined based on prices of similar
assets.
The Company performed both an annual and an interim impairment test of goodwill and indefinite lived
intangible assets during 2008 (see Note 4, “Goodwill Impairment Charges”). In connection with the preparation
of these financial statements, management concluded that $63 million of asset impairment charges were required
in relation to indefinite lived acquired tradenames. As a result of the current economic environment and
expectations regarding future operating performance of the Karen Scott, John Ashford and Frango private brand
tradenames, it was determined that the carrying values exceeded the estimated fair values, which were based on
discounted cash flows, by approximately $63 million.
The Company accounts for its investment in available-for-sale marketable securities with unrealized gains
and losses being included as a separate component of accumulated other comprehensive income. Based on the
F-17