Best Buy 2015 Annual Report Download - page 70

Table of Contents
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the date the assets are placed in service to the end of the lease term, which includes optional renewal periods if they are
reasonably assured. Accelerated depreciation methods are generally used for income tax purposes.
When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our Consolidated
Balance Sheets and any resulting gain or loss is reflected in our Consolidated Statements of Earnings.
Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially
extend the useful life of an asset are capitalized and depreciated.
Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the
expected useful life of the software, from three to seven years. A subsequent addition, modification or upgrade to internal-use
software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software
is included in fixtures and equipment. Software maintenance and training costs are expensed in the period incurred.
Property under capital lease is comprised of buildings and equipment used in our operations. The related depreciation for
capital lease assets is included in depreciation expense. The carrying value of property under capital lease was $44 million and
$58 million at January 31, 2015, and February 1, 2014, respectively, net of accumulated depreciation of $75 million and $62
million, respectively.
Estimated useful lives by major asset category are as follows:
Asset Life (in years)
Buildings 35
Leasehold improvements 3-25
Fixtures and equipment 3-20
Property under capital lease 2-20
Impairment of Long-Lived Assets and Costs Associated With Exit Activities
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an
asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not
limited to, significant under-performance relative to historical or planned operating results, significant changes in the manner of
use or expected life of the assets, or significant changes in our business strategies. An impairment loss is recognized when the
estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from the disposition
of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of
the asset is reduced to its estimated fair value based on quoted market prices or other valuation techniques (e.g., discounted
cash flow analysis).
When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level
for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For example, long-
lived assets deployed at store locations are reviewed for impairment at the individual store level, which involves comparing the
carrying value of all land, buildings, leasehold improvements, fixtures and equipment located at each store to the net cash flow
projections for each store. In addition, we conduct separate impairment reviews at other levels as appropriate, for example, to
evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.
The present value of costs associated with vacated properties, primarily future lease costs (net of expected sublease income),
are charged to earnings when we cease using the property. We accelerate depreciation on property and equipment we expect to
retire when a decision is made to abandon a property.
At January 31, 2015, and February 1, 2014, the obligation associated with vacant properties included in accrued liabilities in
our Consolidated Balance Sheets was $26 million and $33 million, respectively, and the obligation associated with vacant
properties included in long-term liabilities in our Consolidated Balance Sheets was $43 million and $86 million, respectively.
The obligation associated with vacant properties at January 31, 2015, and February 1, 2014, included amounts associated with
our restructuring activities as further described in Note 4, Restructuring Charges.