Express 2011 Annual Report Download - page 69

The Company did not incur any impairment charges on intangible assets in 2011, 2010, or 2009.
Leases and Leasehold Improvements
The Company has leases that contain pre-determined fixed escalations of minimum rentals and/or rent
abatements subsequent to taking possession of the leased property. The related rent expense is recognized on a
straight-line basis commencing upon possession date. The Company records the difference between the
recognized rent expense and amounts payable under the leases as deferred lease credits.
The Company receives allowances from landlords related to its retail stores. These allowances are generally
comprised of cash amounts received from landlords as part of negotiated lease terms. The Company records a
receivable and a landlord allowance upon execution of the corresponding lease. The landlord allowance is
amortized on a straight-line basis as a reduction of rent expense over the term of the lease, including the
pre-opening build-out period. The receivable is reduced as allowance amounts are received from landlords.
The liability for these deferred lease credits (i.e., pre-determined fixed escalations and unamortized landlord
allowances) was $69.8 million and $47.0 million as of January 28, 2012 and January 29, 2011, respectively, and
are included in other long-term liabilities on the Consolidated Balance Sheets.
The Company has leasehold improvements which are depreciated over the shorter of their estimated useful lives
or the period from the date the assets are placed in service to the end of the initial lease term, including renewal
periods, if reasonably assured.
The Company records a contingent rent liability in accrued expenses on the Consolidated Balance Sheets and the
corresponding rent expense in cost of goods sold, buying and occupancy costs in the Consolidated Statements of
Income and Comprehensive Income when specified levels have been achieved or when management determines
that achieving the specified levels during the fiscal year is probable.
Debt Issuance Costs and Discount
Fees and costs, or debt issuance costs, incurred in connection with the Company’s borrowings are capitalized and
included in other assets on the Consolidated Balance Sheets. Debt discounts are reflected as a reduction of debt
on the Consolidated Balance Sheets. Debt issuance costs and debt discounts are amortized to interest expense
over the term of the respective loan agreements. As of January 28, 2012 and January 29, 2011, debt issuance
costs totaled $8.9 million and $14.8 million, respectively. The Company recorded normal amortization expense
related to debt issuance costs of $2.5 million, $3.1 million, and $2.2 million in 2011, 2010, and 2009,
respectively. The Company recorded normal amortization expense for debt discounts of $0.3 million, $0.4
million, and $0.6 million in 2011, 2010, and 2009, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, the amount of
taxes currently payable or refundable are accrued, and deferred tax assets and liabilities are recognized for the
estimated future tax consequences of temporary differences that currently exist between the tax basis and the
financial reporting basis of the Company’s assets and liabilities. Valuation allowances are established against
deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur.
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those
temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is
recognized through continuing operations in the period that includes the enactment date of the change. Changes
in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
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