OfficeMax 2007 Annual Report Download - page 45

estimate our environmental liabilities based on various assumptions and judgments, as we cannot
predict with certainty the total response and remedial costs, our share of total costs, the extent to
which contributions will be available from other parties or the amount of time necessary to complete
any remediation. In making these judgments and assumptions, we consider, among other things,
the activity to date at particular sites, information obtained through consultation with applicable
regulatory authorities and third-party consultants and contractors and our historical experience at
other sites that are judged to be comparable. Due to the number of uncertainties and variables
associated with these assumptions and judgments and the effects of changes in governmental
regulation and environmental technologies, the precision of the resulting estimates of the related
liabilities is subject to uncertainty. We regularly monitor our estimated exposure to our
environmental liabilities. As additional information becomes known, our estimates may change.
Environmental liabilities that relate to the operation of the paper and forest products assets
prior to the closing of the Sale continue to be liabilities of OfficeMax, in addition to the liabilities
related to certain sites referenced in Note 18, Legal Proceedings and Contingencies, of the Notes to
Consolidated Financial Statements in ‘‘Item 8. Financial Statements and Supplementary Data’’ in
this Form 10-K.
Goodwill Impairment
SFAS No. 142, ‘‘Goodwill and Other Intangible Assets,’’ requires us to assess goodwill for
impairment at least annually in the absence of an indicator of possible impairment and immediately
upon an indicator of possible impairment. In assessing impairment, the statement requires us to
make estimates of the fair values of our reporting units. If we determine the fair values are less than
the carrying amount of goodwill recorded on our Consolidated Balance Sheet, we must recognize
an impairment in our financial statements. At December 29, 2007, we had $1.2 billion of goodwill
recorded on our Consolidated Balance Sheet. Of the $1.2 billion, $556.9 million and $659.9 million
were recorded in our OfficeMax, Contract and OfficeMax, Retail segments, respectively. At
December 30, 2006, we had $1.2 billion of goodwill recorded on our Consolidated Balance Sheet.
Of the $1.2 billion, $528.1 million and $687.9 million were recorded in our OfficeMax, Contract and
OfficeMax, Retail segments, respectively. We completed our annual assessment in accordance with
the provisions of SFAS No. 142 in the first quarters of 2007 and 2006, and concluded there was no
impairment.
In testing for potential impairment, we measured the estimated fair value of our reporting units
based upon discounted future operating cash flows using a discount rate reflecting our estimated
average cost of funds. In estimating future cash flows, we used our internal budgets and operating
plans, which include assumptions about retail store openings and closures, the consolidation of our
distribution networks and improvements in our supply chain. Differences in assumptions used in
projecting future operating cash flows and in selecting an appropriate discount rate could have a
significant impact on the determination of fair value and impairment amounts. Due to the numerous
variables associated with our judgments and assumptions relating to the valuation of the reporting
units and the effects of changes in circumstances on these valuations, both the precision and
reliability of the resulting estimates are subject to uncertainty. As additional information becomes
known, we may change our estimates.
Recently Issued or Newly Adopted Accounting Standards
Following are summaries of recently issued accounting pronouncements that have either been
recently adopted or that may become applicable to the preparation of our consolidated financial
statements in the future.
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