Sears 2006 Annual Report Download - page 62

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Goodwill, Tradenames and Other Intangible Assets
Tradenames acquired as part of the Merger account for the majority of the Company’s intangible assets
recognized in the consolidated balance sheet. The majority of these tradename assets, such as Kenmore,
Craftsman and Lands’ End, are expected to generate cash flows indefinitely, do not have estimable or finite
useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain
intangible assets, including favorable lease rights, contractual arrangements and customer lists, have estimable,
finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are
determined using a number of factors, including the demand for the asset, competition and the level of
expenditure required to maintain the cash flows associated with the asset.
The following summarizes the Company’s intangible assets as of February 3, 2007 and January 28, 2006,
respectively, the amortization expenses recorded for the fiscal years then ended, as well as the Company’s
estimated amortization expense for the next five fiscal years.
February 3, 2007 January 28, 2006
millions
Weighted
Average
Life
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Amortized intangible assets
Favorable lease rights ...................... 21 $ 492 $ 97 $ 481 $ 53
Contractual arrangements and customer lists .... 8 240 58 225 27
Tradenames ............................. 9 62 13 57 6
794 168 763 86
Unamortized intangible assets
Tradenames ............................. 2,811 — 2,771 —
Total ....................................... $3,605 $168 $3,534 $ 86
Aggregate Amortization Expense
Fiscal 2006 ....................................................... $87
Fiscal 2005 ....................................................... 99
Estimated Amortization
Fiscal 2007 ....................................................... $89
Fiscal 2008 ....................................................... 78
Fiscal 2009 ....................................................... 70
Fiscal 2010 ....................................................... 64
Fiscal 2011 ....................................................... 59
Goodwill is the excess of the purchase price over the fair value of the net assets acquired in business
combinations accounted for under the purchase method. The Company recorded $1.7 billion in goodwill in
connection with the Merger. Additionally, the Company recorded $167 million in connection with its acquisition
of an additional 16% interest in Sears Canada.
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