Barnes and Noble 2001 Annual Report Download - page 28

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S c o n t i n u e d
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Intangible Assets and Amort i zation
The costs in excess of net assets of businesses acquired
a re carried as intangible assets, net of accumulated
a m o rtization, in the accompanying consolidated
balance sheets. The net intangible assets, consisting
primarily of goodwill and trade names of $352,897 as
of February 2, 2002 and $359,192 as of February 3,
2001, are amortized using the straight-line method over
periods ranging from 30 to 40 years.
On February 3, 2002, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 142,
“Goodwill and Other Intangible Assets,” and as a
result, the Company will cease to amortize the
remaining goodwill. In lieu of amortization, the
Company is required to perform an initial impairment
review of its goodwill in the first six months of fiscal
2002 and an annual impairment review thereafter.
Amortization of goodwill and trade names included in
d e p reciation and amortization in the accompanying
consolidated statements of operations is $12,682,
$12,593 and $5,148 during fiscal 2001, 2000 and
1999, re s p e c t i v e l y. Accumulated amortization at
February 2, 2002 and February 3, 2001 was $74,974
and $62,292, respectively.
Impairment of Long-Lived Asset s
The Company periodically reviews pro p e rty and
equipment and intangibles (primarily goodwill) whenever
events or changes in circumstances indicate that their
carrying amounts may not be recoverable or their
d e p reciation or amortization periods should be
accelerated. The Company assesses recoverability based on
several factors, including management’s intention with
respect to its stores and those stores’ pro j e c t e d
undiscounted cash flows. An impairment loss is re c o g n i z e d
for the amount by which the carrying amount of the assets
exceeds the present value of their projected cash flows.
D ef e r red Charge s
Costs incurred to obtain long-term financing are amort i z e d
over the terms of the respective debt agreements using the
straight-line method, which approximates the intere s t
method. Unamortized costs included in other noncurre n t
assets as of Febru a ry 2, 2002 and Febru a r y 3, 2001 were
$10,436 and $1,286, re s p e c t i v e l y. Amortization expense
included in interest and amortization of deferred financing
fees is $2,292, $1,557 and $389 during fiscal 2001, 2000
and 1999, re s p e c t i v e l y.
M a r ketable Equity Securities
All marketable equity securities included in other
noncurrent assets are classified as available-for-sale
under SFAS No. 115, “Accounting for Cert a i n
Investments in Debt and Equity Securities”. The
Company carries these investments at fair value with
unrealized gains and losses (net of taxes) included in
accumulated other comprehensive earnings, which is
reflected as a separate component of share h o l d e r s ’
equity. Realized gains and losses are recognized in the
Company’s consolidated statement of operations when
the securities are sold or impairment is considered other
than temporary. The Company reviews its equity
holdings on a regular basis to evaluate whether or not
each security has experienced an other-than-temporary
decline in fair value. The Company has reviewed each
of the companies’ financial position, results of operations,
stock price performance and various analyst research
reports and believes that the declines in fair value of its
equity holdings are temporary.
D e r i vat i v e Inst r u m e n t s
Under an agreement expiring February 2, 2003, the
Company uses an interest-rate swap as a derivative to
modify the interest characteristics of its outstanding
floating rate long-term debt, to reduce its exposure
to fluctuations in interest rates. The Company’s
accounting policy is based on its designation of such
instruments as cash flow hedges. The Company does
not enter into such contracts for speculative purposes.
Revenue Recognition
Revenue from sales of the Company’s products is
recognized at the time of sale.
Readers’ Advantage™ membership entitles the customer
to receive a 10 percent discount on all purchases made
during the twelve-month membership period. The
annual membership fee of $25 is non-refundable after
the first 30 days of the membership term. Revenue is
being recognized over the twelve-month membership
period based upon historical spending patterns for
B a r nes & Noble customers. Refunds of membership fees
due to cancellations within the first 30 days are minimal.
Sales returns (which are not significant) are recognized
at the time returns are made.