Dick's Sporting Goods 2013 Annual Report Download - page 75

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DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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undiscounted cash flows expected to result from the use of the asset plus eventual net proceeds expected from disposition of the
asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the
asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation
techniques.
The Company recognizes a liability for costs associated with closed or relocated premises when the Company ceases to use the
location. The calculation of accrued lease termination and other costs primarily includes future minimum lease payments,
maintenance costs and taxes from the date of closure or relocation to the end of the remaining lease term, net of contractual or
estimated sublease income. The liability is discounted using a credit-adjusted risk-free rate of interest. The assumptions used in
the calculation of the accrued lease termination and other costs are evaluated each quarter.
Goodwill – Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired entities. The
Company assesses the carrying value of goodwill annually or whenever circumstances indicate that a decline in value may have
occurred. When evaluating goodwill for impairment, the Company first performs a qualitative assessment to determine if the
fair value of the reporting unit is more likely than not less than the carrying value. If so, the Company proceeds to step one of
the two-step goodwill impairment test, in which the Company compares the fair value of the reporting unit to its carrying value.
If not, then performance of the two-step goodwill impairment test is not necessary. If the carrying value of goodwill exceeds the
implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied
estimated fair value. A reporting unit is the operating segment, or a business unit one level below that operating segment, for
which discrete financial information is prepared and regularly reviewed by management.
Intangible Assets – Intangible assets consist primarily of trademarks and acquired trade names with indefinite lives, which are
tested for impairment annually or whenever circumstances indicate that a decline in value may have occurred. The Company's
finite-lived intangible assets consist primarily of favorable lease assets and other acquisition related assets. Finite-lived
intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors
indicate that an impairment may have occurred.
Gain on Sale of Investment – During fiscal 2011, the Company realized a pre-tax gain of $13.9 million resulting from the sale
of its remaining available-for-sale securities held in GSI Commerce, Inc. ("GSI"), in connection with GSI's acquisition by
eBay, Inc. Prior to the sale, the investment was carried at fair value within other assets and unrealized holding gains and losses
on the stock were included in other comprehensive income and reflected as a component of stockholders' equity.
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.
Pre-opening Expenses – Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are
expensed as incurred.
Earnings Per Common Share – Basic earnings per common share is computed based on the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per common share is computed based on the weighted
average number of shares of common stock, plus the effect of dilutive potential common shares outstanding during the period,
using the treasury stock method. Dilutive potential common shares include outstanding stock options, restricted stock and
warrants.
Stock-Based Compensation – The Company has the ability to grant restricted shares of common stock, restricted stock units
and stock options to purchase common stock under the Dick's Sporting Goods, Inc. 2012 Stock and Incentive Plan. The
Company records stock-based compensation expenses based on the fair value of stock awards at the grant date and recognizes
the expense over the related service period.
Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes and provides deferred
income taxes for temporary differences between the amounts reported for assets and liabilities for financial statement purposes
and for income tax reporting purposes, using enacted tax rates in effect in the years in which the differences are expected to
reverse. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the relevant taxing authorities, based on the technical merits of the position. The