Best Buy 2008 Annual Report Download - page 62

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Effect if Actual Results Differ From
Description Judgments and Uncertainties Assumptions
Self-Insured Liabilities
We are self-insured for certain losses Our self-insured liabilities contain We have not made any material changes
related to health, workers’ compensation uncertainties because management is in the accounting methodology used to
and general liability claims. However, we required to make assumptions on an establish our self-insured liabilities during
obtain third-party insurance coverage to annual basis and to apply judgment to the past three fiscal years.
limit our exposure to these claims. estimate the ultimate cost to settle reported We do not believe there is a reasonable
claims and claims incurred but not
When estimating our self-insured liabilities, likelihood that there will be a material
reported at the balance sheet date.
we consider a number of factors, including change in the estimates or assumptions we
historical claims experience, demographic use to calculate our self-insured liabilities.
factors, severity factors and valuations However, if actual results are not consistent
provided by independent third-party with our estimates or assumptions, we may
actuaries. be exposed to losses or gains that could be
material.
Annually, management reviews its
assumptions and the valuations provided A 10% change in our self-insured liabilities
by independent third-party actuaries to at March 1, 2008, would have affected net
determine the adequacy of our self-insured earnings by approximately $6 million in
liabilities. fiscal 2008.
Acquisitions — Purchase Price Allocation
In accordance with accounting for business Our purchase price allocation methodology During the last three fiscal years, we
combinations, we allocate the purchase contains uncertainties because it requires completed three significant acquisitions. In
price of an acquired business to its management to make assumptions and to May 2007, we acquired Speakeasy for
identifiable assets and liabilities based on apply judgment to estimate the fair value of $103 million, which included transaction
estimated fair values. Minority interests’ acquired assets and liabilities. Management costs and repayment of debt. In June
proportionate ownership of assets and estimates the fair value of assets and 2006, we acquired a 75% interest in Five
liabilities are recorded at historical carrying liabilities based upon quoted market prices, Star for $184 million, which included a
values. The excess of the purchase price the carrying value of the acquired assets working capital injection of $122 million
over the amount allocated to the assets and widely accepted valuation techniques, and transaction costs. In May 2006, we
and liabilities, if any, is recorded as including discounted cash flows and market acquired Pacific Sales for $411 million,
goodwill. multiple analyses. Unanticipated events or which included transaction costs. See
circumstances may occur which could Note 2, Acquisitions, to the Notes to
We use all available information to affect the accuracy of our fair value Consolidated Financial Statements,
estimate fair values. We typically engage estimates, including assumptions regarding included in Item 8, Financial Statements
outside appraisal firms to assist in the fair industry economic factors and business and Supplementary Data, of this Annual
value determination of inventory, strategies. Report on Form 10-K, for the complete
identifiable intangible assets such as purchase price allocation calculations.
tradenames, and any other significant
assets or liabilities. We adjust the We do not believe there is a reasonable
preliminary purchase price allocation, as likelihood that there will be a material
necessary, up to one year after the change in the future estimates or
acquisition closing date as we obtain more assumptions we use to complete the
information regarding asset valuations and purchase price allocation and estimate the
liabilities assumed. fair value of acquired assets and liabilities.
However, if actual results are not consistent
with our estimates or assumptions, we may
be exposed to losses or gains that could be
material.
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