Best Buy 2006 Annual Report Download - page 77

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$ in millions, except per share amounts
63
PART II
Tradename
We have an indefinite-lived intangible asset related to our
Future Shop tradename that totaled $44 and$40 at
February 25, 2006, and February 26, 2005, respectively,
which is included in the International segment. The change
in the indefinite-livedintangible asset balance from
February 26, 2005, was the result of fluctuations in foreign
currency exchange rates.
Lease Rights
Lease rights represent costs incurred toacquire the lease of
aspecific commercial property. Lease rights are recorded at
cost and are amortized to rent expens e overthe remaining
lease term, includingrenewa l periods, if reasonably
assured. Amortization periods range up to 16 years,
beginning with the date we take possession of the property.
The gross cost and accumulated amortization of lease rights
were $29 and $27; and $10 and $9, respectively, at
February 25, 2006, and February 26, 2005, respectively.
Lease rights amortization was $3, $4 and $4 for fiscal
2006, 2005 and 2004, respectively. Current lease rights
amortization is expected to be approximately $3 for each of
the next five fiscal years.
Investments
Short-term and long-term investments are comprised of
municipal and United States government debt securities. In
accordance with SFAS No. 115,Accounting for Certain
Investments in Debt and Equity Securities, and based on our
ability to market and sell these instruments, we classify
auction-rate debt securities, variable-rate demand notes
andother investments in debt securities as available-for-
sale and carrythemat amortized cost, which approximates
fair value. Auction-rate debt securities and variable-rate
demand notes are bonds that are similar to short-term
instruments because their interest rates are reset
periodically. Investments in these securities can besold for
cash on the auction date. We classify auction-rate debt
securities and variable-rate demand notes as short-term or
long-term investments basedon the reset dates.
In accordance with our investment policy, we place our
investments in debt securities with issuers who have high-
quality credit and limit the amount of investment exposure
to any one issuer. We seek to preserve principal and
minimize exposure to interest-rate fluctuations by limiting
default risk, market risk andreinvestment risk.
We holdinvestments in marketable equity securities. We
classify all marketable equity securities as available-for-sale.
Investments in equity securities are included inother assets
in ourconsolidatedbalance sheets and reported at fair
value, based on quoted market prices when available. All
unrealized holding gains are reflected net of tax in
accumulated other comprehensive income in sha reholders’
equity.
We review the key characteristics of ourdebt and equity
securities portfolio and their classification in accordance
with GAAP on anannual basis, or when indications of
potential impairment exist. If a decline in the fair value of a
security is deemed by management to be other than
temporary, the cost basis of the investment is written down
to fairvalue, and the amount of the write-down is included
in the determination of net earnings.
During the third quarter of fiscal 2006, we reclassified
variable-rate demandnotes from cash and cash equivalents
to short-term investments for all periods presented. The
amortized cost of the securities reclassified for fiscal 2005
was $116.
We also revised the presentation in the consolidated
statement of cash flows for the year ended February 26,
2005, to reflect the gross purchases and sales of variable-
rate demand notes as investing activities rather than as a
component of cash and cash equivalents, which is
consistent with the presentation for the fiscal year ended
February 25, 2006. The amount reclassified fromcash and
cash equivalents to investing activities was $116 for fiscal
2005. We did not hold any variable-rate demandnotes
during fiscal 2004.
Insurance
We are self-insured for certain losses related to health,
workers’ compensation and general liability claims,
although we obtain third-party insurance coverage to limit
our exposure to these claims. A portion of these self-insured