Albertsons 2012 Annual Report Download - page 54

discounting an assumed royalty value applied to management’s estimate of projected future revenues associated
with the tradename. The royalty cash flows are discounted using rates based on the weighted average cost of
capital discussed above and the specific risk profile of the tradenames relative to the Company’s other assets.
Refer to Note 2—Goodwill and Intangible Assets in the accompanying Notes to Consolidated Financial
Statements for the results of the goodwill and intangible assets with indefinite useful lives testing performed
during fiscal 2012, 2011 and 2010.
Impairment of Long-Lived Assets
The Company monitors the recoverability of its long-lived assets whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable, including current period losses combined with a history
of losses or a projection of continuing losses, a significant decrease in the market value of an asset or the
Company’s plans for store closures. When such events or changes in circumstances occur, a recoverability test is
performed by comparing projected undiscounted future cash flows to the carrying value of the group of assets
being tested. If impairment is identified for long-lived assets to be held and used, the fair value is compared to
the carrying value of the group of assets and an impairment charge is recorded for the excess of the carrying
value over the discounted future cash flows. For long-lived assets that are classified as assets held for sale, the
Company recognizes impairment charges for the excess of the carrying value plus estimated costs of disposal
over the estimated fair value. Fair value is based on current market values or discounted future cash flows using
Level 3 inputs. The Company estimates fair value based on the Company’s experience and knowledge of the
market in which the property is located and, when necessary, utilizes local real estate brokers. Long-lived asset
impairment charges are a component of Selling and administrative expenses in the Consolidated Statements 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 operating lease. The deferred rents are included in Other current liabilities
and Other long-term liabilities in the Consolidated Balance Sheets.
Self-Insurance Liabilities
The Company is primarily self-insured for workers’ compensation, automobile and general and liability costs. It
is the Company’s policy to record its self-insurance liabilities based on management’s estimate of the ultimate
cost of reported claims and claims incurred but not yet reported and related expenses, discounted at a risk-free
interest rate. The present value of such claims was calculated using discount rates ranging from 0.4 percent to
5.1 percent for fiscal 2012, 0.6 percent to 5.1 percent for fiscal 2011, and 1.1 percent to 5.1 percent for fiscal
2010.
Changes in the Company’s self-insurance liabilities consisted of the following:
2012 2011 2010
Beginning balance $ 1,050 $ 1,101 $ 1,142
Expense 97 154 190
Claim payments (191) (205) (231)
Ending balance 956 1,050 1,101
Less current portion (238) (274) (297)
Long-term portion $ 718 $ 776 $ 804
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