Nordstrom 2015 Annual Report Download - page 45

Depreciation and amortization are computed using the straight-line method over the asset€s estimated useful life, which is determined by
asset category as follows:
Asset Life (in years)
Buildings and improvements 5 ‡ 40
Store fixtures and equipment 3 ‡ 15
Leasehold improvements 5 ‡ 40
Capitalized software 3 ‡ 7
Leasehold improvements and leased property and equipment that are purchased at the inception of the lease, or during the lease term, are
amortized over the shorter of the lease term or the asset life. Lease terms include the fixed, non-cancellable term of a lease, plus any renewal
periods determined to be reasonably assured.
We receive contributions from vendors for the construction of certain fixtures in our stores. These contributions offset the related capital
expenditures.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of the related net assets acquired and is not subject to amortization. As
of January•30, 2016, we had Trunk Club goodwill of $261, HauteLook goodwill of $121 and Nordstrom.com and Jeffrey goodwill of $53. We
review our goodwill annually for impairment or when circumstances indicate its carrying value may not be recoverable. We perform this
evaluation at the reporting unit level, comprised of the principal business units within our Retail segment, through the application of a two-step
fair value test. The first step compares the carrying value of the reporting unit to its estimated fair value, which is based on the expected
present value of future cash flows (income approach), comparable public companies and acquisitions (market approach) or a combination of
both. If fair value is lower than the carrying value, then a second step is performed to quantify the amount of the impairment.
Long-Lived Assets
When facts and circumstances indicate that the carrying values of long-lived assets, including buildings, equipment and amortizable
intangible assets, may be impaired, we perform an evaluation of recoverability by comparing the carrying values of the net assets to their
related projected undiscounted future cash flows, in addition to other quantitative and qualitative analyses.
Land, property and equipment are grouped at the lowest level at which there are identifiable cash flows when assessing impairment. Cash
flows for our retail store assets are identified at the individual store level, while our intangible assets associated with HauteLook and Trunk
Club are identified at their respective reporting unit levels. The assets recorded in connection with the credit card receivable transaction are
individually evaluated against the anticipated cash flows under the program agreement (see Note 2: Credit Card Receivable Transaction).
In 2015, our cash flow analyses resulted in retail store impairment charges of $24 and other various impairment losses of $23. The retail
store impairment of $24 relates to our full-line store in Puerto Rico and was primarily driven by a challenging retail market in this territory. We
did not record any material impairment losses for long-lived tangible or amortizable intangible assets in 2014 or 2013.
Amortization expense for acquired intangibles was $16, $10 and $10 in 2015, 2014 and 2013. Future amortization expense of acquired
intangible assets as of January•30, 2016 are expected to be $15 in 2016, $11 in 2017, $7 in 2018, $7 in 2019, and $7 in 2020.
Self-Insurance
We retain a portion of the risk for certain losses related to employee health and welfare, workers€ compensation and other liability claims.
Liabilities associated with these losses include undiscounted estimates of both losses reported and losses incurred but not yet reported. We
estimate our ultimate cost using an actuarially-based analysis of claims experience, regulatory changes and other relevant factors.
Foreign Currency
We have three full-line stores in Canada and have announced plans to open four additional stores in Canada over the next few years. The
functional currency of our Canadian operations is the Canadian Dollar. We translate assets and liabilities into U.S. Dollars using the
exchange rate in effect at the balance sheet date, while we translate revenues and expenses using a weighted-average exchange rate for the
period. We record these translation adjustments as a component of accumulated other comprehensive loss on the Consolidated Balance
Sheets. In addition, our U.S. operations incur certain expenditures denominated in Canadian Dollars and our Canadian operations incur
certain expenditures denominated in U.S. Dollars. This activity results in transaction gains and losses that arise from exchange rate
fluctuations and are recorded as gains or losses in the Consolidated Statements of Earnings. As of January•30, 2016, activities associated
with the foreign currency exchange risk have not had a material impact on our Consolidated Financial Statements.
Table of Contents
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and per unit amounts
Nordstrom, Inc. and subsidiaries 45