Big Lots 2013 Annual Report Download - page 191

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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 our most common initial lease term range from five to seven years and the majority of our lease options have a
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.
Long-Lived Assets
Our long-lived assets primarily consist of property and equipment - net. In order to determine if impairment indicators are
present for store property and equipment, we review historical operating results at the store level on an annual basis, or when
other impairment indicators are present. 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 expected cash flows, including salvage value, which is based on readily available market information for similar
assets.
Goodwill
Instead of being amortized, goodwill is tested for impairment annually and whenever events or changes in circumstances
indicate the carrying value of the asset may not be recoverable. We use an income approach and a market approach in
determining fair value for purposes of goodwill impairment tests. We perform our annual impairment testing during our second
fiscal quarter of each year.