Lowe's 2012 Annual Report Download - page 52

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When locations under operating leases are closed, a liability is recognized for the fair value of future contractual
obligations, including future minimum lease payments, property taxes, utilities, common area maintenance and other
ongoing expenses, net of estimated sublease income and other recoverable items. When the Company commits to an exit
plan and communicates that plan to affected employees, a liability is recognized in connection with one-time employee
termination benefits. Subsequent changes to the liabilities, including a change resulting from a revision to either the timing
or the amount of estimated cash flows, are recognized in the period of change. Expenses associated with exit activities are
included in SG&A expense in the consolidated statement of earnings.
Equity Method Investments - The Company’s investments in certain unconsolidated entities are accounted for under the
equity method. The balance of these investments is included in other assets (noncurrent) in the accompanying consolidated
balance sheets. The balance is increased to reflect the Company’s capital contributions and equity in earnings of the
investees. The balance is decreased to reflect its equity in losses of the investees and for distributions received that are not
in excess of the carrying amount of the investments. Equity in earnings and losses of the investees has been immaterial and
is included in SG&A expense.
Leases - For lease agreements that provide for escalating rent payments or free-rent occupancy periods, the Company
recognizes rent expense on a straight-line basis over the non-cancellable lease term and option renewal periods where
failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception
of the lease, to be reasonably assured. The lease term commences on the date that the Company takes possession of or
controls the physical use of the property. Deferred rent is included in other liabilities (noncurrent) on the consolidated
balance sheets.
When the Company renegotiates and amends a lease to extend the non-cancellable lease term prior to the date at which it
would have been required to exercise or decline a term extension option, the amendment is treated as a new lease. The new
lease begins on the date the lease amendment is entered into and ends on the last date of the non-cancellable lease term, as
adjusted to include any option renewal periods where failure to exercise such options would result in an economic penalty
in such amount that renewal appears, at the inception of the lease amendment, to be reasonably assured. The new lease is
classified as operating or capital under the authoritative guidance through use of assumptions regarding residual value,
economic life, incremental borrowing rate, and fair value of the leased asset(s) as of the date of the amendment.
Accounts Payable - The Company has an agreement with a third party to provide an accounts payable tracking system
which facilitates participating suppliers’ ability to finance payment obligations from the Company with designated third-
party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more
payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial
institutions. The Company’s goal in entering into this arrangement is to capture overall supply chain savings, in the form of
pricing, payment terms or vendor funding, created by facilitating suppliers’ ability to finance payment obligations at more
favorable discount rates, while providing them with greater working capital flexibility.
The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by
suppliers’ decisions to finance amounts under this arrangement. However, the Company’s right to offset balances due from
suppliers against payment obligations is restricted by this arrangement for those payment obligations that have been
financed by suppliers. As of February 1, 2013 and February 3, 2012, $665 million and $754 million, respectively, of the
Company’s outstanding payment obligations had been placed on the accounts payable tracking system, and participating
suppliers had financed $400 million and $431 million, respectively, of those payment obligations to participating financial
institutions.
Other Current Liabilities - Other current liabilities on the consolidated balance sheets consist of:
(In millions)
February 1,
2013
February 3,
2012
Self-insurance liabilities ..................................................................................... $ 316 $ 318
Accrued dividends .............................................................................................. 178 174
Accrued interest .................................................................................................. 136 126
Accrued property taxes ....................................................................................... 112 102
Sales tax liabilities .............................................................................................. 104 158
Other ................................................................................................................... 664 655
Total ................................................................................................................... $ 1,510 $ 1,533