Lowe's 2015 Annual Report Download - page 49

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related accumulated depreciation is removed from the accounts, with gains and losses reflected in SG&A expense in the
consolidated statements of earnings.
Property consists of land, buildings and building improvements, equipment, and construction in progress. Buildings and
building improvements includes owned buildings, as well as buildings under capital lease and leasehold improvements.
Equipment primarily includes store racking and displays, computer hardware and software, forklifts, vehicles, and other store
equipment.
Depreciation is provided over the estimated useful lives of the depreciable assets. Assets are depreciated using the straight-line
method. Leasehold improvements and assets under capital lease are depreciated over the shorter of their estimated useful lives
or the term of the related lease, which may include one or more 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. During the term of a lease, if leasehold improvements are placed in service significantly after the inception of the
lease, the Company depreciates these leasehold improvements over the shorter of the useful life of the leasehold assets or a
term that includes lease renewal periods deemed to be reasonably assured at the time the leasehold improvements are placed
into service. The amortization of these assets is included in depreciation expense in the consolidated financial statements.
Long-Lived Asset Impairment/Exit Activities - The carrying amounts of long-lived assets are reviewed whenever certain
events or changes in circumstances indicate that the carrying amounts may not be recoverable. A potential impairment has
occurred for long-lived assets held-for-use if projected future undiscounted cash flows expected to result from the use and
eventual disposition of the assets are less than the carrying amounts of the assets. An impairment loss is recorded for long-
lived assets held-for-use when the carrying amount of the asset is not recoverable and exceeds its fair value.
Excess properties that are expected to be sold within the next 12 months and meet the other relevant held-for-sale criteria are
classified as long-lived assets held-for-sale. Excess properties consist primarily of retail outparcels and property associated
with relocated or closed locations. An impairment loss is recorded for long-lived assets held-for-sale when the carrying amount
of the asset exceeds its fair value less cost to sell. A long-lived asset is not depreciated while it is classified as held-for-sale.
For long-lived assets to be abandoned, the Company considers the asset to be disposed of when it ceases to be used. Until it
ceases to be used, the Company continues to classify the asset as held-for-use and tests for potential impairment accordingly. If
the Company commits to a plan to abandon a long-lived asset before the end of its previously estimated useful life, its
depreciable life is re-evaluated.
The Company recorded long-lived asset impairment losses of $10 million during 2015, including $8 million for operating
locations and $2 million for excess properties classified as held-for-use. The Company recorded impairment losses of $28
million during 2014, including $26 million for operating locations and $2 million for excess properties classified as held-for-
use. The Company recorded long-lived asset impairment of $46 million during 2013, including $26 million for operating
locations, $17 million for excess properties classified as held-for-use, and $3 million, including costs to sell, for excess
properties classified as held-for-sale. Impairment losses are included in SG&A expense in the consolidated statements of
earnings. Fair value measurements associated with long-lived asset impairments are further described in Note 2 to the
consolidated financial statements.
The net carrying amount of excess properties that do not meet the held-for-sale criteria is included in other assets (noncurrent)
on the consolidated balance sheets and totaled $131 million and $152 million at January 29, 2016 and January 30, 2015,
respectively.
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 for its equity in losses of the investees, for distributions received that are not in excess of