Barnes and Noble 2012 Annual Report Download - page 37

interests range from  to , are accounted for under
the equity method. All signifi cant intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates
In preparing fi nancial statements in conformity with
generally accepted accounting principles, the Company is
required to make estimates and assumptions that aff ect the
reported amounts of assets and liabilities and the disclo-
sure of contingent assets and liabilities at the date of the
fi nancial statements and revenues and expenses during
the reporting period. Actual results could diff er from those
estimates.
Cash and Cash Equivalents
The Company considers all short-term, highly liquid
instruments purchased with an original maturity of three
months or less to be cash equivalents.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or
market. Cost is determined primarily by the retail inven-
tory method under both the fi rst-in, fi rst-out (FIFO) basis
and the last-in, fi rst-out (LIFO) basis. B&N College’s
textbook and trade book inventories are valued using the
LIFO method, where the related reserve was not material
to the recorded amount of the Company’s inventories or
results of operations.
Market is determined based on the estimated net realiz-
able value, which is generally the selling price. Reserves
for non-returnable inventory are based on the Company’s
history of liquidating non-returnable inventory.
The Company also estimates and accrues shortage for the
period between the last physical count of inventory and
the balance sheet date. Shortage rates are estimated and
accrued based on historical rates and can be aff ected by
changes in merchandise mix and changes in actual shortage
trends.
Property and Equipment
Property and equipment are carried at cost, less accu-
mulated depreciation and amortization. For fi nancial
reporting purposes, depreciation is computed using the
straight-line method over estimated useful lives. For tax
purposes, diff erent methods are used. Maintenance and
repairs are expensed as incurred, while major maintenance
and remodeling costs are capitalized. Leasehold improve-
ments are capitalized and amortized over the shorter of
their estimated useful lives or the terms of the respective
leases. Capitalized lease acquisition costs are being amor-
tized over the lease terms of the underlying leases. Costs
incurred in purchasing management information systems
are capitalized and included in property and equipment.
These costs are amortized over their estimated useful lives
from the date the systems become operational.
Other Long-Lived Assets
The Company’s other long-lived assets include property
and equipment and amortizable intangibles. At April ,
, the Company had , of property and equip-
ment, net of accumulated depreciation, and , of
amortizable intangible assets, net of amortization, account-
ing for approximately . of the Company’s total assets.
The Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable
in accordance with Accounting Standards Codifi cation
(ASC) -, Accounting for the Impairment or Disposal of
Long-Lived Assets (ASC -). The Company evaluates
long-lived assets for impairment at the individual Barnes &
Noble store level, except for B&N College long-lived assets,
which are evaluated for impairment at the school contract
combined store level, which is the lowest level at which
individual cash fl ows can be identifi ed. When evaluating
long-lived assets for potential impairment, the Company
will fi rst compare the carrying amount of the assets to the
individual store’s estimated future undiscounted cash
fl ows. If the estimated future cash fl ows are less than the
carrying amount of the assets, an impairment loss calcula-
tion is prepared. The impairment loss calculation com-
pares the carrying amount of the assets to the individual
store’s fair value based on its estimated discounted future
cash fl ows. If required, an impairment loss is recorded for
that portion of the asset’s carrying value in excess of fair
value. Impairment losses included in selling and adminis-
trative expenses totaled ,, ,, and , during
fi scal , fi scal  and fi scal , respectively, and are
related to individual store locations.
Goodwill and Unamortizable Intangible Assets
The costs in excess of net assets of businesses acquired
are carried as goodwill in the accompanying consolidated
balance sheets.
At April , , the Company had , of goodwill
and , of unamortizable intangible assets (those with
an indefi nite useful life), accounting for approximately
. of the Company’s total assets. ASC -, Goodwill
and Other Intangible Assets, requires that goodwill and other
unamortizable intangible assets no longer be amortized,
but instead be tested for impairment at least annually or
earlier if there are impairment indicators. The Company
2012 Annual Report 35