Pep Boys 2014 Annual Report Download - page 47

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 31, 2015, February 1, 2014 and February 2, 2013
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
method of costing inventory had been used by the Company, inventory would have been $570.2 million
and $579.8 million as of January 31, 2015 and February 1, 2014, respectively. During fiscal 2014, 2013
and 2012, the effect of LIFO layer liquidations on gross profit was immaterial.
The Company’s inventory, consisting primarily of automotive tires, parts, and accessories, is used
on vehicles typically having long lives. Because of this, and combined with the Company’s historical
experience of returning excess inventory to the Company’s suppliers for full credit, the risk of
obsolescence is minimal. The Company establishes a reserve for excess inventory for instances where
less than full credit will be received for such returns or where the Company anticipates items will be
sold at retail prices that are less than recorded costs. The reserve is based on management’s judgment,
including estimates and assumptions regarding marketability of products, the market value of inventory
to be sold in future periods and on historical experiences where the Company received less than full
credit from suppliers for product returns. The Company also provides for estimated inventory shrinkage
based on historical levels and the results of its cycle counting program. The Company’s inventory
adjustments for these matters were immaterial for fiscal 2014 and fiscal 2013. In future periods, the
company may be exposed to material losses should the company’s suppliers alter their policies with
regard to accepting excess inventory returns.
PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight-line method over the following estimated useful lives:
building and improvements, 5 to 40 years, and furniture, fixtures and equipment, 3 to 10 years.
Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and
accumulated depreciation are eliminated and the gain or loss, if any, is included in the determination
of net income. Property and equipment information follows:
January 31, February 1,
(dollar amounts in thousands) 2015 2014
Land ...................................... $ 200,235 $ 202,038
Buildings and improvements ...................... 895,214 888,389
Furniture, fixtures and equipment .................. 759,008 760,170
Construction in progress ........................ 1,720 2,049
Accumulated depreciation ....................... (1,251,797) (1,227,121)
Property and equipment—net..................... $ 604,380 $ 625,525
GOODWILL The accompanying Consolidated Balance Sheet has goodwill recorded as the result
of acquisitions. The Company reviews goodwill for impairment annually during the fourth quarter, or
when events or changes in circumstances indicate the carrying value of these reporting units might
exceed their current fair values. The goodwill impairment test includes a quantitative assessment, which
compares the fair value of the reporting unit to the carrying amount, including goodwill. At fiscal year
end 2014, the Company had eight reporting units, of which six included goodwill. See Note 12
‘‘Goodwill’’ for assessment and testing.
OTHER INTANGIBLE ASSETS The Company amortizes intangible assets with finite lives on a
straight-line basis over their estimated useful lives.
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