OfficeMax 2006 Annual Report Download - page 58

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54
completedits annual assessment in accordance with the provisions of SFAS No. 142 in the first
quarters of 2006 and 2005, and concluded there was no impairment. The Company completed an
additional assessment of the carrying valueofthe goodwill inthe OfficeMax, Retail segment in the
fourth quarter of 2005, in connection with the closure of 109 retail stores in2006, and concluded there
was no impairment.
Intangible assets represent the values assigned to trade names, customer lists andrelationships,
noncompete agreements and exclusive distribution rights of businesses acquired. Trade name assets
have an indefinite life and are not amortized.All other intangible assets are amortized on astraight-line
basis over their expected useful lives, which range from three to 20 years.(See Note 11, Goodwill and
Intangible Assets, for additional information related to goodwill and intangible assets.)
Investments in Affiliates
Investments in affiliated companies that represent less than 20%voting interest are accounted for
under the cost method if theCompany doesnot exercise significant influence over theaffiliated
company. At December 30, 2006 and December 31,2005,the Company held an investment inBoise
Cascade, L.L.C.,which is accounted forunder the cost method. Investments that enable the
Company to exercise significant influence over an affiliated company, but donot represent a
controlling interest, are accounted for under the equity method; such investments are carried at cost
and are adjusted to reflect the Company’s proportionate share of income or loss, less dividends
received. The Company periodically reviewsthe recoverability of investmentsin affiliates.The
Companywould recognize aloss on these inves tmentsif there is a loss invalue of an investment
which is other than a temporary decline. (See Note 10,InvestmentsinAffiliates, for additional
information related to the Company’s investments inaffiliates.)
Capitalized Software Costs
The Company capitalizescertain costsrelated to the acquisition anddevelopment of internal use
software that is expected to benefit future periods in accordance with American Institute of Certified
Public Accountants’ Statement ofPosition (SOP) 98-1, “Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.” These costs are amortized using the straight-line
method over the expectedlifeof the software, which is typically three tofive years.Deferred charges
in the ConsolidatedBalance Sheets include unamortized capitalized software costsof $25.7 million
and $36.7 million at December 30, 2006 and December 31, 2005, respectively. Amortization of
capitalized software costs totaled $17.7 million, $25.6 million and $25.2 million in 2006, 2005 and
2004, respectively.
Software development costs that do not meet the criteria for capitalization are expensedas
incurred.
Facility Closure Reserves
The Company conducts regular reviews of its real estate portfolio to identify underperforming
facilities,and closes those facilities that are no longer strategically or economically viable. The
Company accounts for facility closure costs that are not relatedto a purchasebusiness combination
in accordance with SFAS No. 146, “Accounting for Costs Associated withExit or Disposal Activities.”
In accordance with SFASNo. 146, the Company records a liability for the cost associated with a
facility closureat its fair value in the period in which the liability is incurred, which is either the date the
lease termination is communicated to the lessor or the location’s cease-use date. Upon closure,
unrecoverable costsare includedinfacility closure reserves on theConsolidated Balance Sheets and
include provisions for the present value offuture lease obligations,less contractual or estimated
sublease income. Accretion expense is recognized over the life of the payments.