Rite Aid 2014 Annual Report Download - page 68

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012
(In thousands, except per share amounts)
1. Summary of Significant Accounting Policies (Continued)
recorded as a reduction in selling, general and administrative expenses when the advertising
commitment has been satisfied.
Rent
The Company records rent expense on operating leases on a straight-line basis over the minimum
lease term. The Company begins to record rent expense at the time that the Company has the right to
use the property. From time to time, the Company receives incentive payments from landlords that
subsidize lease improvement construction. These leasehold incentives are deferred and recognized on a
straight-line basis over the minimum lease term.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include store and corporate administrative payroll and
benefit costs, occupancy costs which include retail store and corporate rent costs, facility and leasehold
improvement depreciation and utility costs, advertising, repair and maintenance, insurance, equipment
depreciation and professional fees.
Repairs and Maintenance
Routine repairs and maintenance are charged to operations as incurred. Improvements and major
repairs, which extend the useful life of an asset, are capitalized and depreciated.
Advertising
Advertising costs, net of specific vendor advertising allowances, are expensed in the period the
advertisement first takes place. Advertising expenses, net of vendor advertising allowances, for fiscal
2014, 2013 and 2012 were $322,843, $335,779 and $369,405, respectively.
Insurance
The Company is self-insured for certain general liability and workers’ compensation claims. For
claims that are self-insured, stop-loss insurance coverage is maintained for workers’ compensation
occurrences exceeding $1,000 and general liability occurrences exceeding $2,000. The Company utilizes
actuarial studies as the basis for developing reported claims and estimating claims incurred but not
reported relating to the Company’s self-insurance. Workers’ compensation claims are discounted to
present value using a risk-free interest rate.
Benefit Plan Accruals
The Company has several defined benefit plans, under which participants earn a retirement benefit
based upon a formula set forth in the plan. The Company records expense related to these plans using
actuarially determined amounts that are calculated under the provisions of ASC 715, ‘‘Compensation—
Retirement Benefits.’’ Key assumptions used in the actuarial valuations include the discount rate, the
expected rate of return on plan assets and the rate of increase in future compensation levels.
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