Aarons 2014 Annual Report Download - page 66

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Accounts receivable, net of allowances, consists of the following as of December 31:
(In Thousands) 2014 2013
Customers $ 30,438 $ 8,275
Corporate 32,572 16,730
Franchisee 44,373 43,679
$ 107,383 $ 68,684
The Company maintains an allowance for doubtful accounts. The reserve for returns is calculated based on the historical
collection experience associated with lease receivables. The Company’s policy for its store-based operations is to write off lease
receivables that are 60 days or more past due on pre-determined dates occurring twice monthly. The Company’s policy for its
Progressive division is to write off lease receivables that are 120 days or more contractually past due. The following is a
summary of the Company’s allowance for doubtful accounts as of December 31:
(In Thousands) 2014 2013 2012
Beginning Balance $ 7,172 $ 6,001 $ 4,768
Accounts written off (79,054) (34,723) (30,609)
Bad debt expense 99,283 35,894 31,842
Ending Balance $ 27,401 $ 7,172 $ 6,001
Property, Plant and Equipment
The Company records property, plant and equipment at cost. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the respective assets, which range from five to 40 years for buildings and improvements
and from one to 15 years for other depreciable property and equipment. Costs incurred to develop software for internal use are
capitalized and amortized over the estimated useful life of the software, which ranges from five to 10 years.
Gains and losses related to dispositions and retirements are recognized as incurred. Maintenance and repairs are also expensed
as incurred; renewals and betterments are capitalized. Depreciation expense for property, plant and equipment is included in
operating expenses in the accompanying consolidated statements of earnings and was $53.7 million, $53.3 million and
$53.1 million during the years ended December 31, 2014, 2013 and 2012, respectively. Amortization of previously capitalized
internal use software development costs, which is a component of depreciation expense for property, plant and equipment, was
$5.4 million, $3.3 million and $2.6 million during the years ended December 31, 2014, 2013 and 2012, respectively.
The Company assesses its long-lived assets other than goodwill and other indefinite-lived intangible assets for impairment
whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. When it is determined that
the carrying values of the assets are not recoverable, the Company compares the carrying values of the assets to their fair values
as estimated using discounted expected future cash flows, market values or replacement values for similar assets. The amount
by which the carrying value exceeds the fair value of the asset, if any, is recognized as an impairment loss.
Assets Held for Sale
Certain properties, primarily consisting of parcels of land and commercial buildings, as well as the net assets of the former
RIMCO operating segment, met the held for sale classification criteria as of December 31, 2014 and 2013. After adjustment to
fair value, the $6.4 million and $15.8 million carrying value of these properties has been classified as assets held for sale in the
consolidated balance sheets as of December 31, 2014 and 2013, respectively. The carrying value of assets held for sale at
December 31, 2014 and 2013 were included in the Sales and Lease Ownership segment and the Other segment, respectively. In
January 2014, the Company sold the 27 Company-operated RIMCO stores, which had a carrying value of $9.7 million as of
December 31, 2013 (principally consisting of $7.2 million of lease merchandise and $2.5 million of property, plant and
equipment). Refer to Note 4 to these consolidated financial statements for further discussion of the RIMCO disposal.
The Company estimated the fair values of real estate properties using the market values for similar properties and estimated the
fair value of the RIMCO disposal group based upon expectations of a sale price. These properties are considered Level 2 assets
as defined in ASC Topic 820, Fair Value Measurements.
During the years ended 2014, 2013 and 2012, the Company recorded impairment charges of $805,000, $3.8 million and
$1.1 million, respectively. Such impairment charges related primarily to the impairment of various land outparcels and
buildings included in the Sales and Lease Ownership segment that the Company decided not to utilize for future expansion, as