Napa Auto Parts 2005 Annual Report Download - page 30

28
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily
of prepaid expenses and amounts due from vendors.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets primarily represent the
excess of the purchase price paid over the fair value of the
net assets acquired in connection with business acquisitions.
Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142) requires that when
the fair value of goodwill is less than the related carrying
value, entities are required to reduce the amount of goodwill.
In accordance with the provisions of SFAS No.142, the Company
reviews its goodwill annually in the fourth quarter, or sooner
if circumstances indicate that the carrying amount may exceed
fair value. No goodwill impairments have been recorded in
2005, 2004, or 2003. The impairment-only approach required
by SFAS No. 142 may have the effect of increasing the volatility
of the Company’s earnings if goodwill impairment occurs at a
future date.
SFAS No. 142 also requires that entities discontinue amortization
of all purchased goodwill, including amortization of goodwill
recorded in past business combinations. Accordingly, the
Company no longer amortizes goodwill.
Other Assets
Other assets is comprised of the following:
Property, Plant, and Equipment
Property, plant and equipment are stated at cost. Land and
buildings include certain leases capitalized at December 31,
2005 and 2004. Depreciation and amortization is primarily
determined on a straight-line basis over the following estimated
useful life of each asset: buildings and improvements, 10 to 40
years; machinery and equipment, 5 to 15 years.
Long-Lived Assets Other Than Goodwill
The Company assesses its long-lived assets other than goodwill
for impairment annually or whenever facts and circumstances
indicate that the carrying amount may not be fully recoverable.
To analyze recoverability, the Company projects undiscounted
net future cash flows over the remaining life of such assets. If
these projected cash flows are less than the carrying amount,
an impairment would be recognized, resulting in a write-down
of assets with a corresponding charge to earnings. Impairment
losses, if any, are measured based upon the difference between
the carrying amount and the fair value of the assets.
Other Long-Term Liabilities
Other long-term liabilities consist primarily of certain benefit
liabilities, obligations under capital leases and insurance
liabilities. Insurance liabilities are primarily comprised of
group health and workers’ compensation liabilities. The
Company is self-insured for the majority of group health
insurance costs and carries various large risk deductible
policies for the majority of workers’ compensation liabilities.
The Company calculates these insurance liabilities based
on historical claims information. While the Company
believes the assumptions used to calculate these liabilities
are appropriate, significant differences in actual experience
or significant changes in these assumptions may materially
affect insurance costs.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income is comprised of
the following:
Notes to Consolidated Financial Statements
(continued)
(in thousands) December 31, 2005 2004
Prepaid pension asset $ 402,993 $ 297,496
Investment accounted for
under the cost method 21,400 21,400
Cash surrender value of
life insurance policies 42,142 37,689
Other 43,109 28,118
Total other assets $ 509,644 $ 384,703
(in thousands) December 31, 2005 2004
Foreign currency translation $ 53,164 $ 38,813
Net unrealized loss on derivative
instruments, net of taxes (618) (3,990)
Minimum pension liability,net of taxes (7,011) (8,345)
Total accumulated other
comprehensive income $ 45,535 $ 26,478