Barnes and Noble 2012 Annual Report Download - page 38

performs a two-step process for impairment testing of
goodwill as required by ASC -. The fi rst step of this
test, used to identify potential impairment, compares the
fair value of a reporting unit with its carrying amount. The
second step (if necessary) measures the amount of the
impairment. The Company completed its annual goodwill
impairment test as of the fi rst day of the third quarter of
fi scal . In performing the valuations, the Company
used cash fl ows that refl ected management’s forecasts and
discount rates that included risk adjustments consistent
with the current market conditions. Based on the results
of the Company’s step one testing, the fair values of the
B&N Retail, B&N College and B&N.com reporting units as
of that date exceeded their carrying values; therefore, the
second step of the impairment test was not required to be
performed and no goodwill impairment was recognized.
During the fourth quarter of fi scal  the Company has
determined that the segment previously referred to as B&N.
com is no longer applicable and created a new segment
titled NOOK to report upon its digital business, moving
the eCommerce business (i.e., sales of physical merchan-
dise over the Internet) into the B&N Retail segment. The
Company’s three operating segments are: B&N Retail, B&N
College and NOOK. As a result of this evaluation, , of
goodwill was re-allocated between B&N Retail and NOOK
segments. There were no subsequent indicators of impair-
ment prior to or after the reallocation of goodwill.
The Company tests unamortizable intangible assets by
comparing the fair value and the carrying value of such
assets. The Company also completed its annual impairment
tests for its other unamortizable intangible assets by com-
paring the estimated fair value to the carrying value of such
assets and determined that no impairment was necessary.
Changes in market conditions, among other factors, could
have a material impact on these estimates, except for the
Company’s publishing contracts.
Publishing contracts include the value of long-standing
relationships with authors, agents and publishers estab-
lished upon the Company’s acquisition of Sterling in
. Given Sterling’s strong history of maintaining such
relationships, the Company believes they produce value
indefi nitely without an identifi able remaining useful life.
However, given recent declines in the physical book busi-
ness, these contracts were at risk of impairment as of its
most recent impairment testing date and may be at risk in
the future if declines in sales continue.
Deferred Charges
Costs incurred to obtain long-term fi nancing are amortized
over the terms of the respective debt agreements using the
straight-line method, which approximates the interest
method. Unamortized costs included in other noncurrent
assets as of April ,  and April ,  were ,
and ,, respectively. Amortization expense included
in interest and amortization of deferred fi nancing fees was
,, ,, and , during fi scal , fi scal 
and fi scal , respectively.
Revenue Recognition
Revenue from sales of the Company’s products is recog-
nized at the time of sale, other than those with multiple
elements and FOB destination point shipping terms.
The Company’s products are considered delivered once
they have been shipped and title and risk of loss have
transferred. While the majority of the Company’s ship-
ping terms are FOB shipping point, there are certain third
party distribution partners with shipping terms of FOB
destination point. Certain of the Company sales agree-
ments with these distribution partners contain rights of
inspection or acceptance provisions as is standard in the
Company’s industry. The Company accrues for estimated
sales returns in the period in which the related revenue
is recognized based on historical experience and industry
standards. Sales taxes collected from retail customers are
excluded from reported revenues. All of the Company’s
sales are recognized as revenue on a “net” basis, including
sales in connection with any periodic promotions off ered
to customers. The Company does not treat any promotional
off ers as expenses.
In accordance with ASC -, Revenue Recognition,
Multiple Element Arrangements and Accounting Standards
Updates (ASU) - and -, for multiple-
element arrangements that involve tangible products that
contain software that is essential to the tangible product’s
functionality, undelivered software elements that relate
to the tangible product’s essential software and other
separable elements, the Company allocates revenue to
all deliverables using the relative selling-price method.
Under this method, revenue is allocated at the time of
sale to all deliverables based on their relative selling price
using a specifi c hierarchy. The hierarchy is as follows:
vendor-specifi c objective evidence, third-party evidence
of selling price, or best estimate of selling price. NOOK™
eBook Reader revenue (which includes revenue from the
Company’s NOOK® products) is recognized at the segment
point of sale.
36 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued