OfficeMax 2015 Annual Report Download - page 71

Table of Contents


assess goodwill for possible impairment in future periods by considering qualitative factors, rather than this quantitative test.
Amortizable intangible assets are periodically reviewed to determine whether events and circumstances warrant a revision to the remaining period of
amortization or asset impairment. Certain locations identified for closure resulted in impairment of favorable lease assets recorded as part of the Merger.
Long-lived assets with identifiable cash flows are reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable. Because of recent operating results and implementation of the post-
Merger real estate strategy (the “Real Estate Strategy”), retail store long-lived assets have been reviewed for impairment indicators quarterly. Impairment is
assessed at the individual store level which is the lowest level of identifiable cash flows, and considers the estimated undiscounted cash flows over the asset’s
remaining life. If estimated undiscounted cash flows are insufficient to recover the investment, an impairment loss is recognized equal to the difference
between the estimated fair value of the asset and its carrying value, net of salvage, and any costs of disposition. The fair value estimate is generally the
discounted amount of estimated store-specific cash flows.
Store performance is regularly reviewed against expectations and stores not meeting performance requirements may
be closed. Additionally, since 2014, the Company has been closing stores in connection with the Real Estate Strategy which is expected to be completed in
2016. Refer to Note 3 for additional information.
Costs associated with facility closures, principally accrued lease costs, are recognized when the facility is no longer used in an operating capacity or when a
liability has been incurred. Store assets are also reviewed for possible impairment, or reduction of estimated useful lives.
Accruals for facility closure costs are based on the future commitments under contracts, adjusted for assumed sublease benefits and discounted at the
Company’s credit-adjusted risk-free rate at the time of closing. Accretion expense is recognized over the life of the contractual payments. Additionally, the
Company recognizes charges to terminate existing commitments and charges or credits to adjust remaining closed facility accruals to reflect current
expectations. Accretion expense and adjustments to facility closure costs are presented in the Consolidated Statements of Operations in Selling, general and
administrative expenses if the related facility was closed as part of ongoing operations or in Merger, restructuring and other operating expenses, net, if the
related facility was closed as part of Merger or restructuring activities. Refer to Note 3 for additional information on accrued expenses relating to closed
facilities. The short-term and long-term components of this liability are included in Accrued expenses and other current liabilities and Deferred income taxes
and other long-term liabilities, respectively, on the Consolidated Balance Sheets.
Employee termination costs covered under written and substantive plans are accrued when probable and estimable and consider continuing service
requirements, if any. Additionally, incremental one-time employee benefit costs are recognized when the key terms of the arrangements have been
communicated to affected employees. Amounts are recognized when communicated or over the remaining service period, based on the terms of the
arrangements.
Included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets are accrued payroll-related amounts of
$291 million and $343 million at December 26, 2015 and December 27, 2014, respectively.
69