Best Buy 2011 Annual Report Download - page 77

$ in millions, except per share amounts or as otherwise noted
property under capital lease was $74 and $54 at February 26, 2011, and February 27, 2010, respectively, net of
accumulated depreciation of $45 and $41, respectively.
Estimated useful lives by major asset category are as follows:
Life
Asset (in years)
Buildings 25-50
Leasehold improvements 3-25
Fixtures and equipment 3-20
Property under capital lease 2-20
Impairment of Long-Lived Assets and Costs Associated With Exit Activities
Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or changes in
circumstances indicate the carrying value of an asset may not be recoverable. Factors considered important that could
result in an impairment review include, but are not limited to, significant underperformance relative to historical or
planned operating results, significant changes in the manner of use of the assets or significant changes in our business
strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use
of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset.
When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value based on
quoted market prices or other valuation techniques (e.g., discounted cash flow analysis).
The present value of costs associated with location closings, primarily future lease costs (net of expected sublease income),
are charged to earnings when we have ceased using the specific location. We accelerate depreciation on property and
equipment we expect to retire when a decision is made to abandon a location.
At February 26, 2011, and February 27, 2010, the obligation associated with location closings was $76 and $78,
respectively, and is included within accrued liabilities and long-term liabilities in our consolidated balance sheets. The
obligation associated with location closings at February 26, 2011, included amounts associated with our fiscal 2011
restructuring activities.
Leases
We conduct the majority of our retail and distribution operations from leased locations. The leases require payment of real
estate taxes, insurance and common area maintenance, in addition to rent. The terms of our lease agreements generally
range from 10 to 20 years. Most of the leases contain renewal options and escalation clauses, and certain store leases
require contingent rents based on factors such as specified percentages of revenue or the consumer price index.
For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a
straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any
difference between the straight-line rent amounts and amounts payable under the leases as part of deferred rent, in
accrued liabilities or long-term liabilities, as appropriate.
Cash or lease incentives received upon entering into certain store leases (‘‘tenant allowances’’) are recognized on a
straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial
lease term. We record the unamortized portion of tenant allowances as a part of deferred rent, in accrued liabilities or
long-term liabilities, as appropriate.
At February 26, 2011, and February 27, 2010, deferred rent included in accrued liabilities in our consolidated balance
sheets was $34 and $38, respectively, and deferred rent included in long-term liabilities in our consolidated balance
sheets was $343 and $309, respectively.
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