Best Buy 2011 Annual Report Download - page 64

Effect if Actual Results Differ From
Description Judgments and Uncertainties Assumptions
Self-Insured Liabilities
We are self-insured for certain losses Our self-insured liabilities contain We have not made any material changes
related to health, workers’ compensation uncertainties because management is in the accounting methodology we use to
and general liability claims, as well as required to make assumptions and to apply establish our self-insured liabilities during
customer warranty and insurance judgment to estimate the ultimate cost to the past three fiscal years.
programs, although we obtain third party settle reported claims and claims incurred We do not believe there is a reasonable
insurance coverage to limit our exposure to but not reported at the balance sheet date. likelihood that there will be a material
these claims. We maintain wholly-owned change in the estimates or assumptions we
insurance captives to manage a portion of use to calculate our self-insured liabilities.
these self-insured liabilities. However, if actual results are not consistent
When estimating our self-insured liabilities, with our estimates or assumptions, we may
we consider a number of factors, including be exposed to losses or gains that could be
historical claims experience, demographic material.
factors, severity factors and valuations A 10% change in our self-insured liabilities
provided by independent third-party at February 26, 2011, would have affected
actuaries. net earnings by approximately $8 million in
Periodically, we review our assumptions and fiscal 2011.
the valuations provided by independent
third-party actuaries to determine the
adequacy of our self-insured liabilities.
Acquisitions — Purchase Price Allocation
In accordance with accounting guidance Our purchase price allocation methodology During the last three fiscal years, we
for business combinations, we allocate the contains uncertainties because it requires completed three significant acquisitions:
purchase price of an acquired business to management to make assumptions and to • In February 2009, we acquired the
its identifiable assets and liabilities based apply judgment to estimate the fair value of remaining 25% interest in Five Star for
on estimated fair values. Noncontrolling acquired assets and liabilities. Management $196 million, after having acquired a
interests’ proportionate ownership of assets estimates the fair value of assets and 75% interest in Five Star in June
and liabilities are recorded at historical liabilities based upon quoted market prices, 2006.
carrying values. The excess of the purchase the carrying value of the acquired assets
price over the amount allocated to the and widely accepted valuation techniques, • In October 2008, we acquired
assets and liabilities, if any, is recorded as including discounted cash flows and market Napster for $122 million, including
goodwill. multiple analyses. Unanticipated events or transaction costs.
circumstances may occur which could
We use all available information to • In June 2008, we acquired a 50%
affect the accuracy of our fair value
estimate fair values. We typically engage interest in Best Buy Europe for
estimates, including assumptions regarding
outside appraisal firms to assist in the fair $2.2 billion, including transaction
industry economic factors and business
value determination of identifiable costs.
strategies.
intangible assets such as tradenames and
See Note 2, Acquisitions, to the Notes to
any other significant assets or liabilities. We
Consolidated Financial Statements,
adjust the preliminary purchase price
included in Item 8, Financial Statements
allocation, as necessary, up to one year and Supplementary Data, of this Annual
after the acquisition closing date as we
Report on Form 10-K, for the final
obtain more information regarding asset
purchase price allocations completed in
valuations and liabilities assumed.
fiscal 2010 for such acquisitions.
New Accounting Standards
Consolidation of Variable Interest Entities — In June 2009, the Financial Accounting Standards Board (‘‘FASB’’) issued new
guidance on the treatment of a consolidation of variable interest entities (‘‘VIE’’) in response to concerns about the
application of certain key provisions of pre-existing guidance, including those regarding the transparency of an
involvement with a VIE. Specifically, this new guidance requires a qualitative approach to identifying a controlling financial
interest in a VIE and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the
holder the primary beneficiary of the VIE. In addition, this new guidance requires additional disclosures about an
involvement with a VIE and any significant changes in risk exposure due to that involvement. This new guidance is effective
for fiscal years beginning after November 15, 2009. As such, we adopted the new guidance on February 28, 2010 and
determined that it did not have an impact on our consolidated financial position or results of operations.
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