Kohl's 2010 Annual Report Download - page 52

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Table of Contents


 

Merchandise inventories are valued at the lower of cost or market with cost determined on the first-in, first-out (“FIFO”) basis using the retail inventory
method (“RIM”). Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail
value inventory. RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventory
being valued at the lower of cost or market since permanent markdowns are currently taken as a reduction of the retail value of inventory. We record an
additional reserve when the future estimated selling price is less than cost.

Property and equipment consist of the following:





Land  $1,040
Buildings and improvements  5,887
Store fixtures and equipment  2,169
Property under capital leases   242
Construction in progress  138
Capitalized software  395
Total property and equipment  9,871
Less accumulated depreciation  (2,853)
 $ 7,018
Construction in progress includes land and improvements for locations not yet opened and for the expansion and remodeling of existing locations in
process at the end of each year.
Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Property rights under capital leases and improvements to leased property are amortized on a straight-line basis over the term of the
lease or useful life of the asset, whichever is less. Depreciation and amortization expense for property and equipment, including property under capital leases
and capitalized software, totaled $645 million for 2010, $580 million for 2009 and $528 million for 2008.
The annual provisions for depreciation and amortization generally use the following ranges of useful lives:
Buildings and improvements 8-40 years
Store fixtures and equipment 3-15 years
Property under capital leases 5-40 years
Computer hardware and software 3-8 years
Property and equipment acquired through capital leases totaled $34 million for 2010, $14 million for 2009 and $18 million for 2008.
F-8