Dick's Sporting Goods 2011 Annual Report Download - page 64

Impairment of Long-Lived Assets and Closed Store Reserves
The Company reviews long-lived assets whenever events and circumstances indicate that the carrying
value of these assets may not be recoverable based on estimated undiscounted future cash flows. Assets
are reviewed at the lowest level for which cash flows can be identified, which is the store level. In
determining future cash flows, significant estimates are made by the Company with respect to future
operating results of each store over its remaining lease term. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets.
Based on an analysis of current and future store performance, management periodically evaluates the
need to close underperforming stores. Reserves are established when the Company ceases to use the
location for the present value of any remaining operating lease obligations, net of estimated sublease
income. If the timing or amount of actual sublease income differs from estimated amounts, this could
result in an increase or decrease in the related reserves.
Self-Insurance
The Company is self-insured for certain losses related to health, workers’ compensation and general
liability insurance, although we maintain stop-loss coverage with third-party insurers to limit our liability
exposure. Liabilities associated with these losses are estimated in part by considering historical claims
experience, industry factors, severity factors and other actuarial assumptions.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with fair value recognition
provisions, under which the Company uses the Black-Scholes option-pricing model, which requires the
input of assumptions. These assumptions include estimating the length of time employees will retain
their vested stock options before exercising them (‘‘expected term’’), the estimated volatility of the
Company’s common stock price over the expected term and the expected dividend yield. In addition,
we estimate the number of awards that will ultimately not complete their vesting requirements
(‘‘forfeitures’’) and recognize expense for those stock awards expected to vest. Changes in the
assumptions can materially affect the estimate of fair value of stock-based compensation and
consequently, the related amount recognized on the Consolidated Statements of Income.
Uncertain Tax Positions
We account for uncertain tax positions in accordance with generally accepted accounting principles,
whereby the Company only recognizes the tax benefit from an uncertain tax position if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities. The
application of income tax law is inherently complex. Laws and regulations in this area are voluminous
and are often ambiguous. As such, we are required to make many subjective assumptions and
judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax
laws and regulations change over time. As such, changes in our subjective assumptions and judgments
can materially affect amounts recognized on the Consolidated Balance Sheets and Statements of
Income.
Recently Issued Accounting Pronouncements
See Note 1 to the consolidated financial statements in this 10-K for a detailed description of recent
accounting pronouncements. We do not expect these recently issued accounting pronouncements to
have a material impact on our results of operations, financial condition or liquidity in future periods.
42 Dick’s Sporting Goods, Inc. 2011 Annual Report