Sears 2007 Annual Report Download - page 61

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
A liability is recognized for costs associated with location closings, primarily future lease costs (net of
estimated sublease income), and is charged to income when the Company ceases to use the location.
Goodwill, Tradenames and Other Intangible Assets
Tradenames acquired as part of the Merger account for the majority of our 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 our intangible assets as of February 2, 2008 and February 3, 2007, respectively,
the amortization expenses recorded for the fiscal years then ended, as well as our estimated amortization expense
for the next five fiscal years and thereafter.
Weighted
Average Life
February 2, 2008 February 3, 2007
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
millions
Amortized intangible assets
Favorable lease rights ..................... 21 $ 492 $147 $ 492 $ 97
Contractual arrangements and customer lists . . . 8 246 90 240 58
Tradenames ............................. 8 62 21 62 13
800 258 794 168
Unamortized intangible assets
Tradenames ............................. 2,811 — 2,811 —
Total ....................................... $3,611 $258 $3,605 $168
Aggregate Amortization Expense
Fiscal 2007 ...................................................... $ 90
Fiscal 2006 ...................................................... 87
Estimated Amortization
Fiscal 2008 ...................................................... $ 80
Fiscal 2009 ...................................................... 72
Fiscal 2010 ...................................................... 65
Fiscal 2011 ...................................................... 60
Fiscal 2012 and thereafter ........................................... 265
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. We recorded $1.7 billion in goodwill in connection with
the Merger. Additionally, we recorded $167 million in connection with our acquisition of an additional 16%
interest in Sears Canada.
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