Best Buy 2001 Annual Report Download - page 41

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42
$ in thousands, except per share amounts
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful
lives of the assets or, in the case of leasehold improvements, over the shorter of the estimated useful lives or lease terms. Useful lives
for buildings, leasehold improvements, fixtures and equipment generally range from 30 to 40 years, 10 to 20 years and 3 to 15 years,
respectively. W hen indicators of impairment exist, the Company evaluates long-lived assets for impairment using undiscounted cash
flow analysis.
Goodw ill
Goodwill represents the excess of cost over the fair value of net assets of businesses acquired in fiscal 2001. Goodwill is being
amortized using the straight-line method over 20 years. The Company periodically reviews goodwill for impairment and assesses
whether significant events or changes in business circumstances indicate that the carrying value of the goodwill may not be
recoverable. An impairment loss would be recorded in the period such determination is made. The Company believes that no
material impairment of goodwill existed at March 3, 2001.
Revenue Recognition
The Company recognizes revenues from the sale of merchandise at the time the merchandise is sold. Service revenues are
recognized at the time the service is provided.
The Company sells extended service contracts, called Performance Service Plans, on behalf of an unrelated third party. In those
states where the Company is deemed to be the obligor on the contract at the time of sale, the net commission revenue from the
sale is recognized ratably over the term of the service contract, generally two to five years. For contracts sold in all other states,
the net commission revenue is recognized at the time of sale.
Stock-Based Compensation
The Company accounts for employee stock-based compensation using the intrinsic value method as prescribed under Accounting
Principles Board (APB) O pinion N o. 25, Accounting for Stock Issued to Employees, and related Interpretations. The Company also
presents pro forma net earnings and earnings per share in N ote 5 as if the Company had adopted Statement of Financial Accounting
Standards (SFAS) N o. 123, Accounting for Stock-Based Compensation.
Pre-Opening Costs
N on-capital expenditures associated with opening new stores are expensed as incurred.
Best Buy Co., Inc.N otes