Best Buy 2012 Annual Report Download - page 75

$ in millions, except per share amounts or as otherwise noted
75
Marketable Equity Securities
We also periodically invest in marketable equity securities and classify them as available-for-sale. Investments in marketable
equity securities are included in Equity and Other Investments in our Consolidated Balance Sheets, and are reported at fair
value based on quoted market prices. All unrealized holding gains and losses are reflected net of tax in accumulated other
comprehensive income in shareholders' equity.
Other Investments
We also have investments that are accounted for on either the cost method or the equity method that we include in Equity and
Other Investments in our Consolidated Balance Sheets.
We review the key characteristics of our debt, marketable equity securities and other investments portfolio and their
classification in accordance with GAAP on a quarterly basis, or when indications of potential impairment exist. If a decline in
the fair value of a security is deemed by management to be other-than-temporary, we write down the cost basis of the
investment to fair value, and the amount of the write-down is included in net earnings.
Insurance
We are self-insured for certain losses related to health, workers' compensation and general liability claims, although we obtain
third-party insurance coverage to limit our exposure to these claims. A portion of these self-insured losses are managed through
a wholly-owned insurance captive. We estimate our self-insured liabilities using a number of factors, including historical claims
experience, an estimate of incurred but not reported claims, demographic factors and severity factors, and utilizing valuations
provided by independent third-party actuaries. Our self-insured liabilities included in the Consolidated Balance Sheets were as
follows:
March 3,
2012 February 26, 2011
Accrued liabilities $ 77 $ 81
Long-term liabilities 47 49
Total $ 124 $ 130
Income Taxes
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured pursuant to tax laws using rates we expect to apply to taxable income in the
years in which we expect those temporary differences to be recovered or settled. We recognize the effect of a change in income
tax rates on deferred tax assets and liabilities in our Consolidated Statements of Earnings in the period that includes the
enactment date. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than
not that such assets will not be realized.
In determining our provision for income taxes, we use an annual effective income tax rate based on annual income, permanent
differences between book and tax income, and statutory income tax rates. The effective income tax rate also reflects our
assessment of the ultimate outcome of tax audits. We adjust our annual effective income tax rate as additional information on
outcomes or events becomes available. Discrete events such as audit settlements or changes in tax laws are recognized in the
period in which they occur.
Our income tax returns, like those of most companies, are periodically audited by U.S. federal, state and local and foreign tax
authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions
and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the
various tax authorities. In evaluating the tax benefits associated with our various tax filing positions, we record a tax benefit for
uncertain tax positions using the highest cumulative tax benefit that is more likely than not to be realized. A number of years
may elapse before a particular matter, for which we have established a liability, is audited and effectively settled. We adjust our
liability for unrecognized tax benefits in the period in which we determine the issue is effectively settled with the tax
authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more