Express 2015 Annual Report Download - page 48

Table of Contents
financing obligations in other long-term liabilities on the Consolidated Balance Sheets, for the replacement cost of the Company's portion of the pre-existing
building plus the amount of construction costs incurred by the landlord as of the balance sheet date. Once construction is complete, the Company considers
the requirements for sale-leaseback treatment, including the transfer of all risks of ownership back to the landlord, and whether the Company has any
continuing involvement in the leased property. If the arrangement does not qualify for sale-leaseback treatment, the building assets subject to these
obligations remain on the Company's Consolidated Balance Sheets at their historical cost, and such assets are depreciated over their remaining useful lives.
The replacement cost of the pre-existing building, as well as the costs of construction paid by the landlord, are recorded as lease financing obligations, and a
portion of the lease payments are applied as payments of principal and interest. The interest rate selected for lease financing obligations is evaluated at lease
inception based on the Company's incremental borrowing rate. At the end of the initial lease term, should the Company decide not to renew the lease, the
Company would reverse equal amounts of the remaining net book value of the assets and the corresponding lease financing obligations.
The initial lease terms related to these lease arrangements are expected to expire in 2023 and 2030. The net book value of landlord funded construction,
replacement cost of pre-existing property, and capitalized interest in property and equipment on the Consolidated Balance Sheets was $67.4 million and
$71.0 million, as of January 30, 2016 and January 31, 2015, respectively. There was also $69.6 million and $70.9 million of lease financing obligations as of
January 30, 2016 and January 31, 2015, respectively, in other long-term liabilities on the Consolidated Balance Sheets. Transactions involving the initial
recording of these assets and liabilities were classified as non-cash items for purposes of the Consolidated Statements of Cash Flows.
Rent expense relating to the land is recognized on a straight-line basis over the lease term. The Company does not report rent expense for the portion of the
rent payment determined to be related to the buildings which are owned for accounting purposes. Rather, this portion of rent payment under the lease is
recognized as interest expense and a reduction of the lease financing obligations.

The following table provides the significant components of intangible assets:






Tradename/domain names/trademarks $ 197,597
$ —
$ 197,597
Licensing arrangements 425
172
253
$ 198,022
$ 172
$ 197,850






Tradename/domain names/trademarks $ 197,562
$ —
$ 197,562
Licensing arrangements 1,425
156
1,269
$ 198,987
$ 156
$ 198,831
The Company's tradename, Internet domain names, and trademarks have indefinite lives. Licensing arrangements are amortized over a period of ten years and
are included in other assets on the Consolidated Balance Sheets. Amortization expense totaled $0.1 million, $0.8 million, and $1.3 million during 2015,
2014, and 2013, respectively. 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.
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