Sears 2015 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2015 Sears annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

assumptions in valuing significant tangible and intangible assets, as described in Note 1, Summary of Significant
Accounting Policies.
NOTE 6—INTEREST AND INVESTMENT INCOME (LOSS)
The following table sets forth the components of interest and investment income (loss) as reported in our
Consolidated Statements of Operations:
millions 2015 2014 2013
Interest income on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1$3$4
Gain on de-consolidation of Sears Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 70 —
Other investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63)59 203
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(62) $ 132 $207
Interest Income on Cash and Cash Equivalents
We recorded interest income of $1 million, $3 million and $4 million in 2015, 2014 and 2013, respectively,
primarily related to interest earned on cash and cash equivalents. These cash and cash equivalents consist of highly
liquid investments with original maturities of three months or less at the date of purchase. Our invested cash may
include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal
government securities, floating-rate notes, repurchase agreements and money market funds. All invested cash
amounts are readily available to us.
Gain on de-consolidation of Sears Canada
During 2014, as further described in Note 2, interest and investment income included a gain of $70 million on
the de-consolidation of Sears Canada as a result of the rights offering.
Other Investment Income (Loss)
Other investment income (loss) primarily includes income or loss generated by (and sales of investments in)
certain real estate joint ventures and other equity investments in which we do not have a controlling interest. During
2015, the investment loss from equity investments included a loss of $59 million related to our equity investment in
Sears Canada. Investment income from equity investments was $37 million and $185 million in 2014 and 2013,
respectively.
During 2014, the investment income from equity investments included gains of $35 million related to the sale
of joint venture interests for which Sears Canada received $65 million ($71 million Canadian) in cash proceeds.
During 2013, the investment income from equity investments included gains of $163 million related to sales of real
estate joint ventures for which Sears Canada received $270 million ($297 million Canadian) in cash proceeds.
NOTE 7—BENEFIT PLANS
We sponsor a number of pension and postretirement benefit plans. We account for our retirement programs in
accordance with employers' accounting for defined benefit pension and other postretirement plans under Generally
Accepted Accounting Principles ("GAAP"). GAAP requires that amounts recognized in financial statements be
determined using an actuarial basis. As a result, our pension benefit programs are based on a number of statistical
and judgmental assumptions that attempt to anticipate future events and are used in calculating the expense and
liability related to our plans each year at January 31.€These assumptions include, but are not limited to, discount
rates used to value liabilities, assumed rates of return on plan assets, actuarial assumptions relating to retirement age
and participant turnover, and mortality rates.€The actuarial assumptions we use may differ significantly from actual
results. These differences may result in a material impact to the amount of net periodic benefit cost to be recorded in
our consolidated financial statements in the future.
Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a
participant will receive over their lifetime and the amount of liability and expense we recognize. On October 27,
SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
78