Barnes and Noble 2013 Annual Report Download - page 39

ing amount. The second step (if necessary) measures the
amount of the impairment. The Company completed its
annual goodwill impairment test as of the first day of the
third quarter of fiscal 2013. In performing the valuations,
the Company used cash flows that reflected 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 NOOK 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.
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.
During the fourth quarter of 2013, the Company has
determined that goodwill impairment indicators arose
in its NOOK reporting unit as recurring losses have led
to revisions in its strategic plans. As a result, during the
fourth quarter of fiscal 2013, the Company recorded a
non-cash goodwill impairment charge of $18,332 in selling
and administrative expenses, which represented all the
goodwill in the NOOK reporting unit.
Publishing contracts include the value of long-standing
relationships with authors, agents and publishers estab-
lished upon the Company’s acquisition of Sterling in
2003. Given Sterling’s strong history of maintaining such
relationships, the Company believes they produce value
indefinitely without an identifiable 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.
In fiscal 2013, the Company decided to shut down the
operations of Tikatok. Tikatok was an online platform
where parents and their children and others can write,
illustrate and publish stories into hardcover and paperback
books. This decision resulted in an impairment charge of
$1,973, including the write-off of goodwill of $1,947 and
intangible assets of $26 during the second quarter of fiscal
2013. The effect of Tikatok operations is not material to the
overall results of the Company.
Deferred Charges
Costs incurred to obtain long-term financing 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 27, 2013 and April 28, 2012 were $16,297
and $21,522, respectively. Amortization expense included
in interest and amortization of deferred financing fees was
$5,470, $5,381 and $16,087 during fiscal 2013, fiscal 2012
and fiscal 2011, respectively.
Revenue Recognition
Revenue from sales of the Company’s products is recog-
nized at the time of sale or shipment, other than those with
multiple elements and FOB destination point shipping
terms. The Company’s shipping terms are FOB destina-
tion point. Certain of the Company sales agreements 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.
ECommerce revenue from sales of products ordered
through the Company’s internet site is recognized upon
delivery and receipt of the shipment by its customers.
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 offered to
customers. The Company does not treat any promotional
offers as expenses.
In accordance with ASC 605-25, Revenue Recognition,
Multiple Element Arrangements and Accounting Standards
Updates (ASU) 2009-13 and 2009-14, for multiple-element
arrangements that involve tangible products that contain
software that is essential to the tangible product’s func-
tionality, undelivered software elements that relate to the
tangible product’s essential software and other separable
elements, the Company allocates revenue to all deliver-
ables using the relative selling-price method. Under this
method, revenue is allocated at the time of sale to all deliv-
erables based on their relative selling price using a specific
hierarchy. The hierarchy is as follows: vendor-specific
objective evidence, third-party evidence of selling price,
or best estimate of selling price. NOOK® device revenue is
recognized at the segment point of sale.
The Company includes post-service customer sup-
port (PCS) in the form of software updates and potential
increased functionality on a when-and-if-available basis,
as well as wireless access and wireless connectivity with the
2013 Annual Report 37