Best Buy 2006 Annual Report Download - page 92

$ in millions, except per share amounts
78
during which atenant has the right to control use of the
leased property, but rent payments are not required.
Historically, we recognized rent expense beginning at the
inception of the contractual lease term, which was generally
when the store opened. Effective with the fourth quarter of
fiscal 2005, we now recognize rent expense beginning when
we take possession of the property unless we are actively
constructing the facility in whichcase straight-line rent
amounts are capitalized. See Note 1, Significant Accounting
Policies — New Accounting Standards,for a discussion of FSP
No. FAS 13-1, Accounting for Rental Costs Incurred During a
Construction Period , whichwe will adopt on a prospective
basis in the first quarter of fiscal 2007.
The$21 charge to interest expense was relatedtothe
change in accountingfor certain leases as financing leases
rather than operating leases, as these leases did not qualify
for sale-leaseback treatment in accordance with
SFAS No. 98, Accounting for Leases: Sale-Leaseback
Transactions Involving RealEstate,Sales-Type Leasesof
Real Estate, Definition of the Lease Term, and Initial Direct
Costs of Direct Financing Leases. For financing leases, the
gross cost of constructing the asset is included in property
and equipment and amounts reimbursed from the landlord
are recorded as financing obligations. In fiscal 2005, we
made a $107 adjustment to increase property and
equipment, and financingobligations. This adjustment was
considered a noncash transaction and has been excluded
from the consolidated statements of cash flows. Financing
obligations are included in our consolidated balance sheets
in current portion of long-termdebt and long-termdebt, as
appropriate.
In addition, we reclassifiedcertain tenant allowances in our
consolidated balance sheet at February26, 2005, from a
contra asset in property and equipment to accrued liabilities
or long-term liabilities, as appropriate.
These adjustments had no affect on our historical orfuture
cash flows, or the timing of our lease payments.
8. Benefit Plans
We sponsorretirement savings plans for employees meeting
certain age andservice requirements. Participants may
choose from various investment options including our
company stock. Participants can contribute up to50% of
their eligible compensation annually as defined by the plan
document, subject to IRS limitations. We currently match up
to 50% of the first 5% of participating employees’ pre-tax
earnings.Our matching contributionissubject to annual
approval by our Board. The total matching contributions,
net of forfeitures, were $19, $14 and $13 in fiscal 2006,
2005 and 2004, respectively.
We have a non-qualified, unfunded deferred compensation
plan for certain management employees and our Board
whose contributions are limitedunder qualified defined
contribution plans. Amounts contributedand deferred under
the deferred compensation plan are credited or charged
with the performance of investment options offered under
the plan and elected bythe participants. In the event of
bankruptcy, the assets of this plan are available to satisfy
the claims of general creditors. The liability for
compensation deferred under this plan was $74 and $64 at
February 25, 2006, and February 26, 2005, respectively,
and is included in long-term liabilities. We manage the risk
of changes in the fair value of the liability fordeferred
compensation by electing to match our liability under the
plan with investment vehicles that offset a substantial
portion of ourexposure. The cash value of the investment
vehicles, which includes funding for future deferrals, was
$78and $73 at February 25, 2006, andFebruary 26,
2005, respectively, and is included in other assets. Both the
asset and the liability are carried at fair value.