DSW 2012 Annual Report Download - page 54

F- 14
Buildings 39 years
Furniture, fixtures and equipment 3 to 10 years
Building and leasehold improvements 3 to 20 years or the lease term if that is shorter than the normal life of the asset
Asset Impairment and Long-Lived Assets- DSW periodically evaluates the carrying amount of its long-lived assets, primarily
property and equipment, and finite lived intangible assets when events and circumstances warrant such a review to ascertain if
any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the
carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The reviews are
conducted at the lowest identifiable level, which includes a store. The impairment loss recognized is the excess of the carrying
value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a discount rate determined
by management. Should an impairment loss be realized, it will generally be included in cost of sales. The Company expensed
$1.6 million in fiscal 2011 for identified assets where the recorded value could not be supported by projected future cash flows.
The impairment charges in fiscal 2011 were recorded in other. There were no impairment charges in fiscal 2012 or 2010.
Goodwill- Goodwill represents the excess cost over the estimated fair values of net assets including identifiable intangible
assets of businesses acquired. Goodwill is tested for impairment at least annually. Management evaluates the fair value of the
reporting unit using market-based analysis to review market capitalization as well as reviewing a discounted cash flow analysis
using management’s assumptions. Several factors could result in an impairment charge such as failure to achieve sufficient
levels of cash flow at the reporting unit level or a significant and sustained decline in DSW’s stock price. Significant judgment
is necessary to determine the underlying cause of the decline and whether stock price declines are related to the market or
specifically to DSW. DSW has never recorded a goodwill impairment. As of both February 2, 2013 and January 28, 2012, the
balance of goodwill related to the DSW stores was $25.9 million.
Tradenames and Other Intangible Assets, Net- Tradenames and other intangible assets, net are primarily comprised of values
assigned to tradenames at the time of RVI’s acquisition of DSW. As of both February 2, 2013 and January 28, 2012, the gross
balance of tradenames was $13.0 million. As of February 2, 2013 and January 28, 2012, the average useful lives of tradenames
were 12 years and 14 years, respectively. Accumulated amortization for tradenames was $12.6 million and $11.8 million as of
February 2, 2013 and January 28, 2012, respectively. Amortization expense for fiscal 2012 was $0.8 million. Future
amortization expense associated with the net carrying amount of intangible assets as of February 2, 2013 will be $0.3 million in
fiscal 2013 and less than $0.1 million in each of fiscal 2014 and fiscal 2015.
Equity Investments- The Company accounts for equity investments using the equity method of accounting when it exercises
significant influence over the investment. If the Company does not exercise significant influence, the Company accounts for the
investment using the cost method of accounting.
Self-insurance Reserves- The Company records estimates for certain health and welfare, workers compensation and casualty
insurance costs that are self-insured programs. Self-insurance reserves include actuarial estimates of both claims filed, carried
at their expected ultimate settlement value, and claims incurred but not yet reported. The liability represents an estimate of the
ultimate cost of claims incurred as of the balance sheet date. Estimates for health and welfare, workers’ compensation and
general liability are calculated utilizing claims development estimates based on historical experience and other factors. The
Company has purchased stop loss insurance to limit its exposure on a per person basis for health and welfare and on a per claim
basis for workers compensation and general liability, as well as on an aggregate annual basis. The self-insurance reserves were
$3.5 million and $0.2 million as of February 2, 2013 and January 28, 2012, respectively. The increase in the self-insurance
reserves was due to the elimination of the health and welfare insurance trust.
Customer Loyalty Program- DSW maintains a customer loyalty program for the DSW stores and dsw.com sales channels in
which program members earn reward certificates that result in discounts on future purchases. Upon reaching the target-earned
threshold, the members receive reward certificates for these discounts which expire six months after being issued. DSW
accrues the anticipated redemptions of the discount earned at the time of the initial purchase. To estimate these costs, DSW
makes assumptions related to customer purchase levels and redemption rates based on historical experience.
Legal Proceedings and Claims- The Company is involved in various legal proceedings that are incidental to the conduct of its
business. DSW estimates the range of liability related to pending litigation where the amount of the range of loss can be
estimated. DSW records its best estimate of a loss when the loss is considered probable, including an estimate of legal fees to
be incurred. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability
related to the claim. See Note 15 for a discussion of legal proceedings.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS