Best Buy 2006 Annual Report Download - page 91

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$ in millions, except per share amounts
77
PART II
7. Leases
The composition of rental expense for all operating leases, including leases of property and equipment, during the past three
fiscalyears, was as follows:
2006 2005 2004
Minimum rentals $ 5 69 $ 5 16 $ 4 84
Contingent rentals1 1 1
Total rent expense from continuingoperations 570 517 485
Less: sublease income(18) (16 ) (17)
Net rent expense from continuing operations $552 $501 $ 4 68
The future minimum lease payments under ourcapital, financing and operating leases by fiscal year (not including
contingent rentals) at February 25, 2006, are as follows:
Fiscal Year
Capital
Leases
Financing
Leases
Operating
Leases
2007 $5 $20 $602
2008 420 605
2009 420 582
2010 320 546
2011 320 513
Thereafter 20 113 3,080
Subtotal 39 213 $5,928
Less: imputed interest (12) (56)
Present value of lease obligations $27$157
Total minimum lease payments have not been reduced by minimum sublease rent income of approximately $88 due under
future noncancelable subleases.
During fiscal 2006, we entered into a capital lease
agreement totaling $16 for adistribution center. During
fiscal 2005, we entered into a capital lease agreement
totaling $10 for a corporate facility. Duringfiscal 2004, we
entered into a capital lease agreement totaling $26 for
certain equipment used in our stores. These leases were
noncash transactions and have been eliminated from our
consolidated statements of cash flows.
Fiscal 2005 Lease Accounting Correction
We conducted an extensive review of our lease accounting
practices during the fourth quarter of fiscal 2005 in light of
the views expressedby the Securities and Exchange
Commission (SEC) in its letter dated February 7, 2005, to
the American Institute of Certified Public Accountants
Center for Public CompanyAudit Firms. In the letter, the
SEC expressed its views regarding operatinglease
accounting matters and the related interpretation/
application of these matters under existingGAAP.
Following our review, we recorded a cumulative
fourth-quarter charge of $36 pre-tax ($23 net of tax) to
correct our accounting for certain operating lease matters.
Of the $36 pre-tax charge, $15 was recorded as a charge
to SG&A, while the remaining $21 was recorded as a
charge to interest expense. We determined that no
restatement was required due to the immaterial impact of
the errors on fiscal 2005 and prior periods.
The $15charge to SG&A was primarily related to rent
holidays. Rent holidays are considered to be any period