Dollar Tree 2009 Annual Report Download - page 35

Notes to Consolidated Financial Statements
lives of the respective assets or the committed terms of
the฀related฀leases,฀whichever฀is฀shorter.฀Amortization฀
is included in “selling, general and administrative
expenses” in the accompanying consolidated statements
of operations.
Costs incurred related to software developed for
internal฀use฀are฀capitalized฀and฀amortized฀generally฀over฀
three years.
Goodwill
Goodwill฀is฀not฀amortized,฀but฀rather฀tested฀for฀impair-
ment฀at฀least฀annually.฀In฀addition,฀goodwill฀will฀be฀
tested on an interim basis if an event or circumstance
indicates that it is more likely than not that an impair-
ment loss has been incurred. The Company performed
its฀annual฀impairment฀testing฀in฀November฀2009฀and฀
determined that no impairment loss existed.
Other Assets, Net
Other assets, net consists primarily of restricted invest-
ments and intangible assets. Restricted investments
were฀$78.4฀million฀and฀$58.5฀million฀at฀January฀30,฀
2010฀and฀January฀31,฀2009,฀respectively฀and฀were฀
purchased฀to฀collateralize฀long-term฀insurance฀
obligations. These investments consist primarily of
government-sponsored municipal bonds, similar to the
Company’s฀short-term฀investments฀and฀money฀market฀
securities.฀These฀investments฀are฀classied฀as฀available฀
for sale and are recorded at fair value, which approxi-
mates฀cost.฀Intangible฀assets฀primarily฀include฀favorable฀
lease฀rights฀with฀nite฀useful฀lives฀and฀are฀amortized฀
over their respective estimated useful lives.
Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of
The Company reviews its long-lived assets and certain
identiable฀intangible฀assets฀for฀impairment฀whenever฀
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured
by comparing the carrying amount of an asset to
future net undiscounted cash flows expected to be
generated฀by฀the฀asset.฀If฀such฀assets฀are฀considered฀
to฀be฀impaired,฀the฀impairment฀to฀be฀recognized฀is฀
measured as the amount by which the carrying amount
of the assets exceeds the fair value of the assets based
on discounted cash flows or other readily available
evidence of fair value, if any. Assets to be disposed of
are reported at the lower of the carrying amount or fair
value฀less฀costs฀to฀sell.฀In฀scal฀2009,฀2008฀and฀2007,฀the฀
Company฀recorded฀charges฀of฀$1.3฀million,฀$1.2฀million฀
and฀$0.8฀million,฀respectively,฀to฀write฀down฀certain฀
assets. These charges are recorded as a component of
“selling, general and administrative expenses” in the
accompanying consolidated statements of operations.
Financial Instruments
The฀Company฀utilizes฀derivative฀nancial฀instruments฀
to reduce its exposure to market risks from changes
in interest rates and diesel fuel costs. By entering into
receive-variable,฀pay-xed฀interest฀rate฀and฀diesel฀fuel฀
swaps, the Company limits its exposure to changes
in variable interest rates and diesel fuel prices. The
Company is exposed to credit-related losses in the
event of non-performance by the counterparty to these
instruments. However, these swaps are in a net liability
position฀as฀of฀January฀30,฀2010,฀therefore฀no฀credit฀risk฀
exists฀as฀of฀that฀date.฀Interest฀rate฀or฀diesel฀fuel฀cost฀
differentials paid or received on the swaps are recog-
nized฀as฀adjustments฀to฀interest฀and฀freight฀expense,฀
respectively, in the period earned or incurred. The
Company formally documents all hedging relationships,
if applicable, and assesses hedge effectiveness both at
inception and on an ongoing basis. The interest rate
swaps that qualify for hedge accounting are recorded
at fair value in the accompanying consolidated balance
sheets฀as฀a฀component฀of฀“other฀liabilities”฀(see฀Note฀6).฀
Changes in the fair value of these interest rate swaps
are recorded in “accumulated other comprehensive loss”,
net of tax, in the accompanying consolidated balance
sheets. The Company entered into diesel fuel swaps in
the฀fourth฀quarter฀of฀2009฀that฀do฀not฀qualify฀for฀hedge฀
accounting. The fair value of this interest rate swap is
recorded in the accompanying consolidated balance
sheets฀as฀a฀component฀of฀“other฀liabilities”฀(see฀Note฀6).฀
Fair Value Measurements
In฀February฀2008,฀the฀Financial฀Accounting฀Standards฀
Board (FASB) released new guidance which delayed
the฀effective฀date฀to฀value฀all฀non-nancial฀assets฀and฀
non-nancial฀liabilities,฀except฀those฀that฀are฀recognized฀
or disclosed at fair value on a recurring basis (at least
annually)฀until฀the฀rst฀quarter฀of฀2009.฀The฀adoption฀
of฀the฀new฀guidance฀did฀not฀have฀a฀signicant฀impact฀
on the Consolidated Financial Statements.
Fair฀value฀is฀dened฀as฀an฀exit฀price,฀representing฀
the amount that would be received to sell an asset or
paid to transfer a liability in an orderly transaction
฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀33