Express 2015 Annual Report Download - page 44

Table of Contents
The Company did not incur any impairment charges on indefinite lived intangible assets in 2015, 2014, or 2013.
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. In 2015, the Company recognized an impairment charge of $0.9 million related to a licensing agreement associated with the
exit of certain franchise locations. Impairment charges are recorded in selling, general, and administrative expenses in the Consolidated Statements of Income
and Comprehensive Income.

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 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 also has leases that contain contingent rent provisions,
such as overage rent. For these leases, 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 financial levels have been achieved or when management determines that achieving the specified financial levels during the year is probable.
The Company receives allowances for leasehold improvements from landlords related to its 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 recorded as a deferred lease credit on the Consolidated Balance Sheets. 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 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 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.
A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not
recognition threshold to be recognized.
The Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when the Company's judgment changes as a result of the
evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment
that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense
and the effective tax rate in the period in which the new information becomes available.
Interest and penalties related to unrecognized tax benefits are recognized within income tax expense in the Consolidated Statements of Income and
Comprehensive Income. Accrued interest and penalties are included within other long-term liabilities on the Consolidated Balance Sheets.
The income tax liability was $21.2 million and $16.4 million as of January 30, 2016 and January 31, 2015, respectively, and is included in accrued expenses
on the Consolidated Balance Sheets.
44