Best Buy 2008 Annual Report Download - page 78

$ in millions, except per share amounts or as otherwise noted
and losses are reflected net of tax in accumulated other that entitle the lenders to a portion of the cash discounts
comprehensive income in shareholders’ equity. provided by the suppliers.
At March 1, 2008, and March 3, 2007, $26 and $39,
Other Investments respectively, were outstanding and included in accrued
We also have investments that are accounted for on either the liabilities on our consolidated balance sheets; and $215 and
cost method or the equity method that we include in equity $196, respectively, were available for use under these inventory
and other investments in our consolidated balance sheets. financing facilities.
We review the key characteristics of our debt, marketable Borrowings and payments on our inventory financing facilities
equity securities and other investments portfolio and their were classified as financing activities in our consolidated
classification in accordance with GAAP on an annual basis, or statements of cash flows in other, net.
when indications of potential impairment exist. If a decline in
the fair value of a security is deemed by management to be Income Taxes
other-than-temporary, we write down the cost basis of the We account for income taxes using the asset and liability
investment to fair value, and the amount of the write-down is method. Under this method, deferred tax assets and liabilities
included in net earnings. are recognized for the estimated future tax consequences
attributable to differences between the financial statement
Insurance carrying amounts of existing assets and liabilities and their
We are self-insured for certain losses related to health, respective tax bases, and operating loss and tax credit
workers’ compensation and general liability claims, although carryforwards. Deferred tax assets and liabilities are measured
we obtain third-party insurance coverage to limit our exposure pursuant to tax laws using rates we expect to apply to taxable
to these claims. A portion of these self-insured losses is income in the years in which we expect those temporary
managed through a wholly-owned insurance captive. We differences to be recovered or settled. We recognize the effect
estimate our self-insured liabilities using a number of factors of a change in income tax rates on deferred tax assets and
including historical claims experience, an estimate of incurred liabilities in our consolidated statement of earnings in the
but not reported claims, demographic factors, severity factors period that includes the enactment date. We record a
and valuations provided by independent third-party actuaries. valuation allowance to reduce the carrying amounts of
Our self-insured liabilities included in the consolidated balance deferred tax assets if it is more likely than not that such assets
sheets were as follows: will not be realized.
March 1, March 3, In determining our provision for income taxes, we use an
2008 2007 annual effective income tax rate based on annual income,
Accrued liabilities $52 $51 permanent differences between book and tax income, and
Long-term liabilities 45 44 statutory income tax rates. The effective income tax rate also
Tota l $ 97 $ 9 5 reflects our assessment of the ultimate outcome of tax audits.
We adjust our annual effective income tax rate as additional
information on outcomes or events becomes available.
Inventory Financing
Discrete events such as audit settlements or changes in tax
We have inventory financing facilities through which certain laws are recognized in the period in which they occur.
suppliers receive payments from a designated finance
Our income tax returns, like those of most companies, are
company on invoices we owe them. Amounts due under the
periodically audited by U.S. federal, state and local and
facilities are collateralized by a security interest in certain
foreign tax authorities. These audits include questions regarding
merchandise inventories. The amounts extended bear interest,
our tax filing positions, including the timing and amount of
if we exceed certain terms, at rates specified in the
deductions and the allocation of income among various tax
agreements. We impute interest based on our borrowing rate
jurisdictions. At any one time, multiple tax years are subject to
where there is an average balance outstanding. Imputed
audit by the various tax authorities. In evaluating the tax
interest is not significant. Certain agreements have provisions
benefits associated with our various tax filing positions, we
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