Ross 2011 Annual Report Download - page 33

31
Depreciation and amortization expense. Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically ranging
from five to 12 years for equipment and 20 to 40 years for land improvements and buildings. The cost of leasehold improvements
is amortized over the lesser of the useful life of the asset or the applicable lease term.
Lease accounting. When a lease contains “rent holidays” or requires fixed escalations of the minimum lease payments, we
record rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount
charged to expense and the amount payable under the lease is recorded as deferred rent. We begin recording rent expense on
the lease possession date. Tenant improvement allowances are included in other long-term liabilities and are amortized over the
lease term. Changes in tenant improvement allowances are included as a component of operating activities in the consolidated
statements of cash flows.
Insurance obligations. We use a combination of insurance and self-insurance for a number of risk management activities,
including workers’ compensation, general liability, and employee-related health care benefits. Our self-insurance and deductible
liability is determined actuarially, based on claims filed and an estimate of claims incurred but not reported. Should a greater
amount of claims occur compared to what is estimated or the costs of medical care increase beyond what was anticipated, our
recorded reserves may not be sufficient and additional charges could be required.
Stock-based compensation. We recognize compensation expense based upon the grant date fair value of all stock-based
awards. We use historical data to estimate pre-vesting forfeitures and to recognize stock-based compensation expense. All stock-
based compensation awards are expensed over the service or performance periods of the awards.
Income taxes. We account for our uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740.
We are required to make assumptions and judgments regarding our income tax exposures. Our policy is to recognize interest
and/or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not
ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in
the period that such determination is made.
The critical accounting policies noted above are not intended to be a comprehensive list of all of our accounting policies. In many
cases, the accounting treatment of a particular transaction is specifically dictated by Generally Accepted Accounting Principles
(“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s judgment
in selecting one alternative accounting principle over another would not produce a materially different result. See our audited
consolidated financial statements and notes thereto under Item 8 in this Annual Report on Form 10-K, which contain accounting
policies and other disclosures required by GAAP.
Effects of inflation or deflation. We do not consider the effects of inflation or deflation to be material to our financial position
and results of operations.
New Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU 2011-04”). ASU
2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the
disclosures required for fair value measurements. ASU 2011-04 is to be applied prospectively and is effective for the Company in
fiscal 2012. We believe adoption of this guidance will not have a material impact on our consolidated financial statements.