The Gap 2007 Annual Report Download - page 33

Interest of $10 million, $8 million, and $11 million related to assets under construction was capitalized in fiscal
2007, 2006, and 2005, respectively.
We recorded a charge for the impairment of long-lived assets of $13 million, $29 million, and $3 million for fiscal
2007, 2006, and 2005, respectively. See Note 3 for the impairment charge related to the closure of Forth &
Towne.
Lease Rights and Key Money
Lease rights are stated at cost less accumulated amortization and are included in other long-term assets on the
Consolidated Balance Sheets as follows:
($ in millions)
February 2,
2008
February 3,
2007
Lease rights, at cost .......................................................... $110 $112
Less: Accumulated amortization ................................................ (73) (72)
Lease rights, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37 $ 40
Both the cost and accumulated amortization of lease rights are impacted by fluctuations in foreign currency rates.
Amortization expense associated with lease rights was $6 million in each of fiscal 2007, 2006, and 2005.
Key money is stated at cost less accumulated amortization and is included in other long-term assets on the
Consolidated Balance Sheets as follows:
($ in millions)
February 2,
2008
February 3,
2007
Keymoney,atcost........................................................... $80 $69
Less: Accumulated amortization ................................................ (74) (61)
Key money, net of accumulated amortization ..................................... $ 6 $ 8
Both the cost and accumulated amortization of key money are impacted by fluctuations in foreign currency rates.
Amortization expense associated with key money was $4 million in each of fiscal 2007 and 2006.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
($ in millions)
February 2,
2008
February 3,
2007
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 380 $ 304
Unredeemedgiftcards ....................................................... 319 311
Deferred rent and tenant allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 109
Workers’compensation ....................................................... 38 36
Accruedadvertising .......................................................... 30 23
Generalliabilityinsurance ..................................................... 28 38
Salesreturnallowance ....................................................... 22 21
Creditcardrewards .......................................................... 18 26
Othercurrentliabilities ........................................................ 314 291
Accrued expenses and other current liabilities ..................................... $1,259 $1,159
48฀฀฀Form฀10-K
As of February 2, 2008, we began classifying gift card liability and credit card reward certificate liability as accrued
expenses and other current liabilities in our Consolidated Balance Sheets. Accordingly, gift card liability of $311
million and credit card reward certificate liability of $26 million as of February 3, 2007, which were previously
classified as accounts payable on the Consolidated Balance Sheets, were reclassified to conform to the current
year presentation.
No other items accounted for greater than five percent of total current liabilities as of February 2, 2008 or
February 3, 2007.
Lease Incentives and Other Long-Term Liabilities
Lease incentives and other long-term liabilities consist of the following:
($ in millions)
February 2,
2008
February 3,
2007
Deferredrentandtenantallowances ............................................ $ 832 $836
Long-termtax-relatedliabilities ................................................. 173 13
Assetretirementobligations ................................................... 29 25
Otherlong-termliabilities...................................................... 47 36
Lease incentives and other long-term liabilities .................................... $1,081 $910
The activity related to asset retirement obligations was not material for fiscal 2007 and includes fluctuations in
foreign currency rates.
Comprehensive Earnings
The components of accumulated other comprehensive earnings as shown on our Consolidated Balance Sheets
are as follows:
($ in millions)
Foreign
Currency
Translation
Fluctuations
in the Fair
Market
Value of
Financial
Instruments
Accumulated
Other
Comprehensive
Earnings
BalanceatFebruary3,2007..................................... $ 63 $14 $ 77
Fiscal2007activity............................................. 84 (36) 48
Balance at February 2, 2008 ..................................... $147 $(22) $125
Sales Return Allowance
A summary of activity in the sales return allowance account is as follows:
($ in millions)
February 2,
2008
February 3,
2007
January 28,
2006
Balanceatbeginningofyear ........................................ $ 21 $ 18 $ 19
Additions......................................................... 698 672 704
Returns .......................................................... (697) (669) (705)
Balanceatendofyear ............................................. $ 22 $ 21 $ 18
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