Big Lots 2009 Annual Report Download - page 163

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1 — Summary of Significant Accounting Policies (Continued)
Store Supplies
When opening a new store, a portion of the initial shipment of supplies (including primarily display materials,
signage, security-related items, and miscellaneous store supplies) is capitalized at the store opening date. These
capitalized supplies represent more durable types of items for which we expect to receive future economic
benefit. Subsequent replenishments of capitalized store supplies are expensed. The consumable/non-durable
type items for which the future economic benefit is less measurable are expensed upon shipment to the store.
Capitalized store supplies are adjusted periodically for changes in estimated quantities or costs and are included
in other current assets in our consolidated balance sheets.
Property and Equipment — Net
Depreciation and amortization expense of property and equipment are recorded on a straight-line basis using
estimated service lives. The estimated service lives of our property and equipment by major asset category were
as follows:
Land improvements ........................................ 15 years
Buildings ................................................. 40 years
Leasehold improvements .................................... 5 years
Store fixtures and equipment ................................. 5 years
Distribution and transportation fixtures and equipment ............ 5 - 15 years
Office and computer equipment ............................... 5 years
Computer software costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 7 years
Company vehicles .......................................... 3 years
Leasehold improvements are amortized on a straight-line basis using the shorter of their estimated service lives
or the lease term. Because the majority of our leasehold improvements are placed in service at the time we open
a store and our typical initial lease term is five years, we estimate the useful life of leasehold improvements
at five years. This amortization period is consistent with the amortization period for any lease incentives that
we would typically receive when initially entering into a new lease that are recognized as deferred rent and
amortized over the initial lease term.
Depreciation estimates are revised prospectively to reflect the remaining depreciation or amortization of the
asset over the shortened estimated service life when a decision is made to dispose of property and equipment
prior to the end of its previously estimated service life. The cost of assets sold or retired and the related
accumulated depreciation are removed from the accounts with any resulting gain or loss included in selling and
administrative expenses. Major repairs that extend service lives are capitalized. Maintenance and repairs are
charged to expense as incurred. Capitalized interest was not significant in any period presented.
Long-Lived Assets
Our long-lived assets primarily consist of property and equipment, net. In order to determine if impairment
indicators are present on store property and equipment, we annually review historical operating results at the
store level. Generally, all other property and equipment is reviewed for impairment at the enterprise level. If the
net book value of a store’s long-lived assets is not recoverable by the expected future cash flows of the store, we
estimate the fair value of the store’s assets and recognize an impairment charge for the excess net book value of
the store’s long-lived assets over their fair value. Our assumptions related to estimates of future cash flows are
based on historical results of cash flows adjusted for management projections for future periods. We estimate
the fair value of our long-lived assets using readily available market information for similar assets.