Best Buy 2003 Annual Report Download - page 161

Merchandise inventories are recorded at the lower of cost or market. The methods we use to determine cost are the average cost and
retail inventory methods.
Property and Equipment
Property and equipment are recorded at cost. We compute depreciation 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.
Estimated useful lives by major asset category for continuing operations are as follows:
Asset Life (in years)
Buildings 30−40
Leasehold improvements 10−25
Fixtures and equipment 3−15
Property under capital lease 5−35
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$ in millions, except per share amounts
Impairment of Long−Lived Assets and Costs Associated with Exit Activities
In March 2002 we adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal
of Long−Lived Assets, which requires long−lived assets, such as property and equipment, to be evaluated for impairment whenever
events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized
when 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.
We adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, on January 1, 2003. Since adoption, the
present value of costs associated with location closings, primarily future lease costs, are charged to earnings when a location is
vacated. Prior to adoption, we recognized a liability when we made the decision to relocate or close the location.
Goodwill and Intangible Assets
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted
for under the purchase method. Effective March 3, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which
eliminated the systematic amortization of goodwill. The Statement also required that we review goodwill for impairment at adoption
and at least annually thereafter.
A reconciliation of reported earnings adjusted to reflect the adoption of SFAS No. 142, as if it were effective for all fiscal years
presented, is provided below.
2003 2002 2001
Reported earnings from continuing operations $ 622 $ 570 $ 401
Add back goodwill amortization, net of tax — 2 1
Adjusted earnings from continuing operations 622 572 402
Reported loss from discontinued operations, net of tax (441) — (5)
Add back goodwill amortization, net of tax — 16 1
Adjusted (loss) earnings from discontinued operations (441) 16 (4)
Cumulative effect of change in accounting principles, net of tax (82) — —
Adjusted net earnings $ 99 $ 588 $ 398
Reported basic earnings per share from continuing operations $ 1.93 $ 1.80 $ 1.29
Add back goodwill amortization — 0.01 —