Best Buy 2016 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2016 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

64
Assets acquired under capital and financing leases are depreciated over the shorter of the useful life of the asset or the lease
term, including renewal periods, if reasonably assured.
Goodwill and Intangible Assets
Goodwill
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We
test goodwill for impairment annually, as of the first day of the fiscal fourth quarter, or when indications of potential
impairment exist. We monitor the existence of potential impairment indicators throughout the fiscal year. We test for goodwill
impairment at the reporting unit level and our reporting units are the components of operating segments which constitute
businesses for which discrete financial information is available and is regularly reviewed by segment management. No
components were aggregated in arriving at our reporting units. Our only reporting unit with a goodwill balance at the beginning
of fiscal 2016 was our Domestic segment.
Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including
goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is
based on discounted cash flows or relative market-based approaches. If the fair value exceeds carrying value, then it is
concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second
step is required to measure possible goodwill impairment loss. The second step includes hypothetically valuing the tangible and
intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then,
the implied fair value of the reporting unit's goodwill is compared to the carrying value of that goodwill. If the carrying value of
the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount
equal to the excess, not to exceed the carrying value. No goodwill impairment was recorded in fiscal 2015. In fiscal 2016, we
determined that the fair value of the Best Buy Domestic reporting unit exceeded its carrying value, and as a result, no goodwill
impairment was recorded in fiscal 2016.
Tradenames
We include our tradenames and customer relationships within intangibles, net in our Consolidated Balance Sheets. We have an
indefinite-lived tradename related to Pacific Sales included within our Domestic segment. As of the end of fiscal 2016, we have
no indefinite-lived tradenames within our International segment.
Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of
acquisition, using income and market approaches to determine fair value. We do not amortize our indefinite-lived tradenames,
but test for impairment annually, or when indications of potential impairment exist. We utilize the relief from royalty method to
determine the fair value of each of our indefinite-lived tradenames. If the carrying value exceeds the fair value, we recognize an
impairment loss in an amount equal to the excess. As a part of the Canada brand restructuring, we fully impaired the indefinite-
lived Future Shop tradename during fiscal 2016. Refer to Note 4, Restructuring Charges, for additional information. No other
impairments were identified during fiscal 2016.