Ross 2014 Annual Report Download - page 36

Long-lived assets. We review for a long-lived asset impairment charge when events or changes in circumstances indicate
that the carrying amount of a long-lived asset may not be recoverable based on estimated future cash flows. If analysis of
the undiscounted cash flow of an asset group was less than the carrying value of the asset group, an impairment loss would
be recognized to write the asset group down to its fair value. If our actual results differ materially from projected results, an
impairment charge may be required in the future. In the course of performing our annual analysis, we determined that no long-
lived asset impairment charge was required for fiscal 2014, 2013, or 2012.
Depreciation and amortization expense. Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically
ranging from three to 12 years for equipment and 20 to 40 years for land improvements and buildings. The cost of leasehold
improvements is amortized over the lesser of the useful life of the asset or the applicable lease term.
Lease accounting. When a lease contains “rent holidays” or requires fixed escalations of the minimum lease payments, we
record rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount
charged to expense and the amount payable under the lease is recorded as deferred rent. We begin recording rent expense on
the lease possession date. Tenant improvement allowances are included in Other long-term liabilities and are amortized over the
lease term. Changes in tenant improvement allowances are included as a component of operating activities in the Consolidated
Statements of Cash Flows.
Insurance obligations. We use a combination of insurance and self-insurance for a number of risk management activities,
including workers’ compensation, general liability, and employee-related health care benefits. Our self-insurance and deductible
liability is determined actuarially, based on claims filed and an estimate of claims incurred but not reported. Should a greater
amount of claims occur compared to what is estimated or the costs of medical care increase beyond what was anticipated, our
recorded reserves may not be sufficient and additional charges could be required.
Stock-based compensation. We recognize compensation expense based upon the grant date fair value of all stock-based
awards. We use historical data to estimate pre-vesting forfeitures and to recognize stock-based compensation expense. All
stock-based compensation awards are expensed over the service or performance periods of the awards.
Income taxes. We account for our uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740.
We are required to make assumptions and judgments regarding our income tax exposures. Our policy is to recognize interest
and/or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not
ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in
the period that such determination is made.
The critical accounting policies noted above are not intended to be a comprehensive list of all of our accounting policies. In
many cases, the accounting treatment of a particular transaction is specifically dictated by Generally Accepted Accounting
Principles (“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s
judgment in selecting one alternative accounting principle over another would not produce a materially different result. See our
audited consolidated financial statements and notes thereto under Item 8 in this Annual Report on Form 10-K, which contain
accounting policies and other disclosures required by GAAP.
Recently issued accounting standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The guidance provides a five-step
analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company
should recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the
consideration which the company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for
our annual and interim reporting periods beginning in fiscal 2017. We are currently evaluating the effect adoption of this new
guidance will have on our consolidated financial statements.
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