Big Lots 2010 Annual Report Download - page 119

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45
BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1 — Summary of Significant Accounting Policies (Continued)
Payments Received from Vendors
Payments received from vendors relate primarily to rebates and reimbursement for markdowns and are
recognized in our consolidated statements of operations as a reduction to cost of inventory purchases in the
period that the rebate or reimbursement is earned or realized and, consequently, result in a reduction in cost of
sales when the related inventory is sold.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 - 8 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 the majority of our leases have an initial term of 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.