Albertsons 2006 Annual Report Download - page 61

SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Reserves for Self Insurance:
The company is primarily self-insured for workers’ compensation, health care for certain employees and
general and automobile liability costs. It is the company’s policy to record its self-insurance liabilities based on
claims filed and an estimate of claims incurred but not yet reported, discounted at a risk free interest rate. Any
projection of losses concerning workers’ compensation, health care and general and automobile liability is
subject to a considerable degree of variability. Among the causes of this variability are unpredictable external
factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes
and claim settlement patterns.
Property, Plant and Equipment:
Property, plant and equipment are carried at cost. Depreciation, as well as amortization of assets under
capital leases, is based on the estimated useful lives of the assets using the straight-line method. Estimated useful
lives generally are 10 to 40 years for buildings and major improvements, 3 to 10 years for equipment, and the
shorter of the term of the lease or expected life for leasehold improvements. Interest on property under
construction of $1.9 million, $0.2 million and $0.4 million was capitalized in fiscal years 2006, 2005 and 2004,
respectively.
Goodwill and Other Intangible Assets:
Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and
intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are
not amortized, but instead are tested for impairment at least annually. Intangible assets with estimable useful
lives are amortized over their respective estimated useful lives to their estimated residual values, and are
reviewed for impairment.
Impairment of Long-Lived Assets:
In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the company monitors the carrying value of
long-lived assets for potential impairment each quarter based on whether certain trigger events have occurred.
These events include current period losses combined with a history of losses or a projection of continuing losses
or a significant decrease in the market value of an asset. When a trigger event occurs, an impairment calculation
is performed by comparing projected undiscounted future cash flows rates to the carrying value of the asset or
group of assets as defined in SFAS No. 144. If impairment is identified for long-lived assets to be held and used,
discounted future cash flows are compared to the asset’s current carrying value. Impairment is recorded when the
carrying value exceeds the discounted cash flows. Impairment charges are a component of selling and
administrative expenses in the Consolidated Statement of Earnings.
Deferred Rent:
The company recognizes rent holidays, including the time period during which the company has access to
the property prior to the opening of the site, as well as construction allowances and escalating rent provisions, on
a straight-line basis over the term of the lease. The deferred rents are included in other current liabilities and
other long-term liabilities on the Consolidated Balance Sheets.
Benefit Plans:
The company sponsors pension and other retirement plans in various forms covering primarily non-union
employees who meet eligibility requirements. The determination of the company’s obligation and expense for
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