Best Buy 2011 Annual Report Download - page 78

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$ in millions, except per share amounts or as otherwise noted
We also lease certain equipment under noncancelable operating and capital leases. In addition, we have financing leases
for which the gross cost of constructing the asset is included in property and equipment, and amounts reimbursed from the
landlord are recorded as financing obligations. Assets acquired under capital and financing leases are depreciated over
the shorter of the useful life of the asset or the lease term, including renewal periods, if reasonably assured.
Goodwill and Intangible Assets
Goodwill
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business
combinations. We do not amortize goodwill but test it for impairment annually in the fiscal fourth quarter, or when
indications of potential impairment exist. We monitor the existence of potential impairment indicators throughout the fiscal
year.
Tradenames and Customer Relationships
We have indefinite-lived intangible assets related to our Pacific Sales and Napster tradenames, which are included in our
Domestic segment. We also have indefinite-lived intangible assets related to our Future Shop and Five Star tradenames
and definite-lived intangible assets related to our The Carphone Warehouse and The Phone House tradenames, which are
included in our International segment. Additionally, we have definite-lived intangible assets related to customer
relationships acquired as part of our acquisition of Best Buy Europe, which are also included in our International segment.
Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the
time of acquisition, using income and market approaches to determine fair value. We test our indefinite-lived tradenames
annually for impairment, or when indications of potential impairment exist.
Our tradenames and customer relationships were as follows:
February 26, 2011 February 27, 2010
Customer Customer
Tradenames Relationships Tradenames Relationships
Indefinite-lived $105 $ — $112 $ —
Definite-lived 28 203 47 279
Total $133 $203 $159 $279
Goodwill Impairment Testing
We test for goodwill impairment at the reporting unit level. A reporting unit is an operating segment, or a business unit
one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by
segment management.
The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair
value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit. If the fair
value exceeds carrying value, then we conclude that no goodwill impairment has occurred. If the carrying value of the
reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second
step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting
unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is
compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied
fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying
value.
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