Express 2012 Annual Report Download - page 61

factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying
amount. The consideration of indefinite lived intangible assets for impairment requires judgments surrounding
future operating performance, economic conditions, and business plans, among other factors.
Intangible assets with finite lives are amortized on a basis reflecting when the economic benefits of the assets are
consumed or otherwise used up over their respective estimated useful lives. Intangible assets with finite lives are
reviewed for impairment when events or changes in circumstances indicate the carrying amount of the asset may
not be recoverable. If the estimated undiscounted future cash flows related to the asset are less than the carrying
value, the Company recognizes a loss equal to the difference between the carrying value and the estimated fair
value, usually determined by the estimated discounted future cash flows of the asset.
The Company did not incur any impairment charges on intangible assets in 2012, 2011, or 2010.
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 $91.5 million and $69.8 million as of February 2, 2013 and January 28, 2012, 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 the initial lease term,
including renewal periods if reasonably assured, or their estimated useful lives.
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 year is probable.
Debt Issuance Costs and Discount
Fees incurred in connection with the Company’s borrowings, referred to as debt issuance costs, 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 February 2, 2013 and January 28, 2012, debt
issuance costs totaled $7.6 million and $8.9 million, respectively. The Company recorded normal amortization
expense related to debt issuance costs of $1.3 million, $2.5 million, and $3.1 million in 2012, 2011, and 2010,
respectively. The Company recorded normal amortization expense for debt discounts of $0.3 million, $0.3
million, and $0.4 million in 2012, 2011, and 2010, 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
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