Best Buy 2006 Annual Report Download - page 59

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45
PART II
Description Judgments and Uncertainties
Effect if Actual Results Differ From
Assumptions
Long-Lived Assets
Long-lived assets other than goodwill and
indefinite-lived intangibleassets, which are
separately tested for impairment, are
evaluated for impairment whenever events
or changes in circumstances indicate that
the carrying value may not be recoverable.
When evaluating long-lived assets for
potential impairment, we first compare the
carrying value of the asset to the asset’s
estimated future cash flows (undiscounted
and without interest charges). If the
estimated future cash flows are less than the
carrying value of the asset,we calculate an
impairment loss. The impairment loss
calculationcompares the carrying value of
the asset to the asset’s estimated fair value,
whichmay be based on estimated future
cash flows (discounted and with interest
charges). We recognize an impairment loss
if the amount of the asset’s carrying value
exceeds the asset’s estimated fair value. If
we recognize an impairment loss, the
adjusted carrying amount of the asset
becomes its new cost basis. For a
depreciable long-lived asset, the new cost
basis will be depreciated (amortized) over
the remaining useful life of that asset.
Using the impairment evaluation
methodology described herein, we recorded
long-lived asset impairment charges totaling
$4 million, in the aggregate, during the
fiscal year ended February 25, 2006.
Our impairment loss calculations contain
uncertainties because they require
management to make assumptions and to
apply judgment to estimate future cash
flows and asset fair values, including
forecasting useful lives of the assets and
selecting the discount rate that reflects the
risk inherent in future cash flows.
We have not made any material changes in
our impairment loss assessment
methodology during the past three fiscal
years.
We do not believe there is a reasonable
likelihood that there will be a material
change in the estimates or assumptions we
use to calculate long-lived asset impairment
losses. However, if actual results are not
consistent with our estimates and
assumptions used in estimating future cash
flows and asset fair values, we may be
exposed to losses that could be material.