Express 2015 Annual Report Download - page 43

Table of Contents
financing company for expenses the Company incurs based on usage of the private label credit cards. These reimbursement funds are used by the Company to
fund marketing programs associated with the private label credit card and are recognized when the amounts are fixed or determinable and collectability is
reasonably assured, which is generally at the time the private label credit cards are used or specified transactions occur. The funds received related to these
private label credit cards are classified in selling, general, and administrative expenses in the Consolidated Statements of Income and Comprehensive
Income.
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The Company maintains a customer loyalty program in which customers earn points toward rewards for qualifying purchases and other marketing programs.
Upon reaching specified point values, customers are issued a reward, which they may redeem for purchases at the Company's U.S. stores or on its website.
Generally, rewards earned must be redeemed within 60 days from the date of issuance. The Company accrues for the anticipated costs related to redemptions
of the certificates as points are earned. To calculate this expense, the Company estimates margin rates and makes assumptions related to card holder
redemption rates, which are both based on historical experience. This expense is included within cost of goods sold, buying and occupancy costs in the
Consolidated Statements of Income and Comprehensive Income. The loyalty liability is included in accrued expenses on the Consolidated Balance Sheets.
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Property and equipment are stated at cost. Depreciation of property and equipment is computed on a straight-line basis, using the following useful lives:
 
Software, including software developed for internal use 3 - 7 years
Store related assets and other property and equipment 3 - 10 years
Furniture, fixtures and equipment 5 - 7 years
Leasehold improvements Shorter of lease term or useful life of the asset,
typically no longer than 15 years
Building improvements 6 - 30 years
When a decision is made to dispose of property and equipment prior to the end of its previously estimated useful life, depreciation estimates are revised to
reflect the use of the asset over the shortened estimated useful life. The cost of assets sold or retired and the related accumulated depreciation are removed
from the accounts with any resulting gain or loss included in other operating expense (income), net, in the Consolidated Statements of Income and
Comprehensive Income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend useful lives are capitalized.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable. The reviews are conducted at the store level, the lowest identifiable level of cash flow. The impairment test requires the Company to estimate the
fair value of the assets and compare this to their carrying value. If the fair value of the assets are less than the carrying value, then an impairment charge is
recognized and the non-financial assets are recorded at fair value. The Company estimates the fair value using a discounted cash flow model. Factors used in
the evaluation include, but are not limited to, management's plans for future operations, recent operating results, and projected cash flows. In 2015, as a result
of decreased performance in certain stores, the Company recognized impairment charges of $1.8 million related to four stores. In 2014, the Company
recognized impairment charges of $10.5 million related to 14 stores. The impairment charges related to store leasehold improvements in 2013 were minimal.
Impairment charges are recorded in cost of goods sold, buying, and occupancy costs in the Consolidated Statements of Income and Comprehensive Income.
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The Company has intangible assets, which consist primarily of the Express and related tradenames and its Internet domain names. Intangible assets with
indefinite lives are reviewed for impairment annually in the fourth quarter and may be reviewed more frequently if indicators of impairment are present. The
impairment review is performed by assessing qualitative 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.
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