It consists of 3 parts: Project registration slip, attendance question and homework week 6 Complete the Project Registration Slip from your Red Company text
It consists of 3 parts: Project registration slip, attendance question and homework week 6
Complete the Project Registration Slip from your Red Company textbook. (The final project is due in week 9. This is just the document that lists your choice of company). The sheet is located in the Red Company manual and is most likely the last page of the pdf or near the last page. Upload this document into the Project Registration Dropbox.
Complete Attendance Question 3
Please locate a news article or two regarding how Covid-19 is going to impact financial statements this quarter/year. Write a paragraph about the implications on financial statements in 2020 and/or 2021.
Homework Week 6
URL: https://www.youtube.com/watch?v=-2WqB7TwtPQ
GameStop Analysis
1. Watch the video on how to download the financial statements from the SEC Edgar website.
2. Download the GME financial statements year ending Jan 30, 2021.
3. Perform a horizontal analysis on fiscal years 2021 and 2020.
4. Perform a vertical analysis on fiscal years 2021 and 2020.
5. Complete the following ratios: Current, Gross Margin, Return on Equity, Debt to Cash Flow, Dupont Analysis
6. Discuss 3 observations related to the financial health of GME based on your analysis
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Annual Report Project
1. Fill in the boxes below
2. Turn in this slip – as directed by your instructor
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This is your Software ID Code you received in an email when you purchased Red Company, or on your Software ID Code sheet that was provided to you by your instructor.
Your: First Name
Last Name
Assigned ARP Company:
Instructor:
Class Time:
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Seat or ID#:
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,
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors The Home Depot, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries (the Company) as of January 31, 2021 and February 2, 2020, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended January 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021 and February 2, 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company elected to change its method of accounting for Leases as of February 4, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), and related amendments.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimation of store shrink using a sampling approach
As discussed in Note 1 to the consolidated financial statements, the majority of the Company’s U.S. merchandise inventory balances are stated at lower of cost (first-in, first out) or market as determined by the retail inventory method. The retail inventory method is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). Shrink is the difference between the recorded amount of inventory and the physical inventory counted. The Company calculates shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between physical
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inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. Due to changes in operating conditions during fiscal 2020 as a result of the COVID-19 pandemic, the Company used the results from a sample of stores that were able to conduct physical inventory counts as a basis for estimating shrink for those stores at which physical inventory counts were temporarily suspended during the year.
We identified the evaluation of the estimation of store shrink using a sampling approach as a critical audit matter. Evaluating the Company’s use of sampling and its reliability to produce results substantially the same as those which would be obtained by a count of all U.S. retail stores involved a high degree of auditor judgment. Additionally, professionals with specialized skills and knowledge assisted the engagement team.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the process of developing and selecting the sampling model to estimate store shrink. We evaluated the appropriateness of the Company using sampling by comparing shrink results and store characteristics across the population to assess the sample’s reliability to produce results substantially the same as those which would be obtained by a count of all U.S. retail stores. We involved sampling professionals with specialized skills and knowledge who assisted in:
• Evaluating the Company’s design of a sampling method and key parameters used; and • Testing the Company’s application of a sampling model by evaluating formulas and calculations.
Fair value of customer relationships intangible asset
As discussed in Note 12 to the consolidated financial statements, on December 24, 2020, the Company acquired HD Supply Holdings, Inc. (HDS) in a business combination. As a result of the transaction, the Company acquired a customer relationships intangible asset associated with the generation of future income from existing customers. The preliminary, estimated acquisition-date fair value for the customer relationships intangible asset was approximately $2.6 billion. The Company used an income approach to determine the estimated fair value of the customer relationships intangible asset.
We identified the evaluation of the fair value of the customer relationships intangible asset acquired in the HDS business combination as a critical audit matter. There was a high degree of subjective auditor judgment related to certain assumptions used in the valuation model. Significant assumptions included the amount and timing of future cash flows, growth rates, customer attrition rate, and the discount rate applied. Changes in these assumptions could have a significant impact on the fair value of the customer relationships intangible asset. Professionals with specialized skill and knowledge were also required to assess significant assumptions and evaluate evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation process, including controls related to the development of the above assumptions. We evaluated the amount and timing of future cash flows and growth rates used by the Company by comparing projected cash flows to certain publicly available information for comparable companies, industry reports, and historical revenues achieved. We performed sensitivity analyses over the Company’s assumptions used to determine the preliminary, estimated fair value of the customer relationships intangible asset to assess the impact changes in those assumptions would have on the Company’s determination of fair value. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating:
• Long term growth rates used to project future cash flows by comparing to certain nationwide economic trend data such as GDP, inflation, and relevant industry data;
• Expected customer attrition rate applied by developing an independent attrition rate using historical sales data; and
• Discount rate applied by developing an independent discount rate and comparing inputs to certain publicly available market data for comparable entities.
/s/ KPMG LLP
We have served as the Company’s auditor since 1979.
Atlanta, Georgia March 24, 2021
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THE HOME DEPOT, INC. CONSOLIDATED BALANCE SHEETS
in millions, except per share data January 31,
2021 February 2,
2020
Assets Current assets: Cash and cash equivalents $ 7,895 $ 2,133 Receivables, net 2,992 2,106 Merchandise inventories 16,627 14,531 Other current assets 963 1,040
Total current assets 28,477 19,810 Net property and equipment 24,705 22,770 Operating lease right-of-use assets 5,962 5,595 Goodwill 7,126 2,254 Other assets 4,311 807
Total assets $ 70,581 $ 51,236
Liabilities and Stockholders’ Equity Current liabilities: Short-term debt $ — $ 974 Accounts payable 11,606 7,787 Accrued salaries and related expenses 2,463 1,494 Sales taxes payable 774 605 Deferred revenue 2,823 2,116 Income taxes payable 193 55 Current installments of long-term debt 1,416 1,839 Current operating lease liabilities 828 828 Other accrued expenses 3,063 2,677
Total current liabilities 23,166 18,375 Long-term debt, excluding current installments 35,822 28,670 Long-term operating lease liabilities 5,356 5,066 Deferred income taxes 1,131 706 Other long-term liabilities 1,807 1,535
Total liabilities 67,282 54,352
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,789 shares at January 31, 2021 and 1,786 shares at February 2, 2020; outstanding: 1,077 shares at January 31, 2021 and February 2, 2020 89 89
Paid-in capital 11,540 11,001 Retained earnings 58,134 51,729 Accumulated other comprehensive loss (671) (739) Treasury stock, at cost, 712 shares at January 31, 2021 and 709 shares at
February 2, 2020 (65,793) (65,196) Total stockholders’ equity (deficit) 3,299 (3,116) Total liabilities and stockholders’ equity $ 70,581 $ 51,236
————— See accompanying notes to consolidated financial statements.
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THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF EARNINGS
in millions, except per share data Fiscal Fiscal Fiscal 2020 2019 2018
Net sales $ 132,110 $ 110,225 $ 108,203 Cost of sales 87,257 72,653 71,043
Gross profit 44,853 37,572 37,160 Operating expenses:
Selling, general and administrative 24,447 19,740 19,513 Depreciation and amortization 2,128 1,989 1,870 Impairment loss — — 247 Total operating expenses 26,575 21,729 21,630
Operating income 18,278 15,843 15,530 Interest and other (income) expense: Interest and investment income (47) (73) (93) Interest expense 1,347 1,201 1,051 Other — — 16
Interest and other, net 1,300 1,128 974 Earnings before provision for income taxes 16,978 14,715 14,556 Provision for income taxes 4,112 3,473 3,435 Net earnings $ 12,866 $ 11,242 $ 11,121
Basic weighted average common shares 1,074 1,093 1,137 Basic earnings per share $ 11.98 $ 10.29 $ 9.78
Diluted weighted average common shares 1,078 1,097 1,143 Diluted earnings per share $ 11.94 $ 10.25 $ 9.73
————— Fiscal 2020 and fiscal 2019 include 52 weeks. Fiscal 2018 includes 53 weeks. See accompanying notes to consolidated financial statements.
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THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Fiscal Fiscal in millions 2020 2019 2018 Net earnings $ 12,866 $ 11,242 $ 11,121 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 60 53 (267) Cash flow hedges 8 8 53 Other — 3 8
Total other comprehensive income (loss) 68 64 (206) Comprehensive income $ 12,934 $ 11,306 $ 10,915
————— Fiscal 2020 and fiscal 2019 include 52 weeks. Fiscal 2018 includes 53 weeks. See accompanying notes to consolidated financial statements.
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THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
in millions Fiscal Fiscal Fiscal 2020 2019 2018
Common Stock: Balance at beginning of year $ 89 $ 89 $ 89 Shares issued under employee stock plans — — —
Balance at end of year 89 89 89
Paid-in Capital: Balance at beginning of year 11,001 10,578 10,192 Shares issued under employee stock plans 229 172 104 Stock-based compensation expense 310 251 282
Balance at end of year 11,540 11,001 10,578
Retained Earnings: Balance at beginning of year 51,729 46,423 39,935 Cumulative effect of accounting changes — 26 75 Net earnings 12,866 11,242 11,121 Cash dividends (6,451) (5,958) (4,704) Other (10) (4) (4)
Balance at end of year 58,134 51,729 46,423
Accumulated Other Comprehensive Income (Loss): Balance at beginning of year (739) (772) (566) Cumulative effect of accounting changes — (31) — Foreign currency translation adjustments, net of tax 60 53 (267) Cash flow hedges, net of tax 8 8 53 Other, net of tax — 3 8
Balance at end of year (671) (739) (772)
Treasury Stock: Balance at beginning of year (65,196) (58,196) (48,196) Repurchases of common stock (597) (7,000) (10,000)
Balance at end of year (65,793) (65,196) (58,196) Total stockholders’ equity (deficit) $ 3,299 $ (3,116) $ (1,878)
————— Fiscal 2020 and fiscal 2019 include 52 weeks. Fiscal 2018 includes 53 weeks. See accompanying notes to consolidated financial statements.
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THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Fiscal Fiscal in millions 2020 2019 2018 Cash Flows from Operating Activities: Net earnings $ 12,866 $ 11,242 $ 11,121 Reconciliation of net earnings to net cash provided by operating
activities: Depreciation and amortization 2,519 2,296 2,152 Stock-based compensation expense 310 251 282 Impairment loss — — 247 Changes in receivables, net (465) (170) 33 Changes in merchandise inventories (1,657) (593) (1,244) Changes in other current assets 43 (135) (257) Changes in accounts payable and accrued expenses 5,118 32 870 Changes in deferred revenue 702 334 80 Changes in income taxes payable (149) 44 (42) Changes in deferred income taxes (569) 202 26 Other operating activities 121 184 (103)
Net cash provided by operating activities 18,839 13,687 13,165
Cash Flows from Investing Activities: Capital expenditures (2,463) (2,678) (2,442) Payments for businesses acquired, net (7,780) — (21) Other investing activities 73 25 47
Net cash used in investing activities (10,170) (2,653) (2,416)
Cash Flows from Financing Activities: Repayments of short-term debt, net (974) (365) (220) Proceeds from long-term debt, net of discounts and premiums 7,933 3,420 3,466 Repayments of long-term debt (2,872) (1,070) (1,209) Repurchases of common stock (791) (6,965) (9,963) Proceeds from sales of common stock 326 280 236 Cash dividends (6,451) (5,958) (4,704) Other financing activities (154) (140) (153)
Net cash used in financing activities (2,983) (10,798) (12,547) Change in cash and cash equivalents 5,686 236 (1,798) Effect of exchange rate changes on cash and cash equivalents 76 119 (19) Cash and cash equivalents at beginning of year 2,133 1,778 3,595
Cash and cash equivalents at end of year $ 7,895 $ 2,133 $ 1,778
Supplemental Disclosures: Cash paid for income taxes $ 4,654 $ 3,220 $ 3,774 Cash paid for interest, net of interest capitalized 1,241 1,112 1,035 Non-cash capital expenditures 274 136 248
————— Fiscal 2020 and fiscal 2019 include 52 weeks. Fiscal 2018 includes 53 weeks. See accompanying notes to consolidated financial statements.
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THE HOME DEPOT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business
The Home Depot, Inc., together with its subsidiaries (the “Company,” “Home Depot,” “we,” “our” or “us”), is a home improvement retailer that sells a wide assortment of building materials, home improvement products, lawn and garden products, décor items, and facilities maintenance, repair and operations products, and provides a number of services, in stores and online. We operate in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico.
Consolidation and Presentation
Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. Intercompany transactions are eliminated in consolidation. Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. Fiscal 2020 and fiscal 2019 include 52 weeks while fiscal 2018 includes 53 weeks.
Impact of COVID-19
The outbreak of the COVID-19 coronavirus, which was declared a pandemic by the World Health Organization in March 2020, has led to adverse impacts on the U.S. and global economies and has impacted and continues to impact our supply chain, operations, and customer demand. Even though the Company has taken measures to adapt to operating in this challenging environment, the pandemic could further affect our operations and the operations of our suppliers and vendors as a result of additional shut-downs or other governmental orders; restrictions and limitations on travel, logistics and other business activities; potential product and labor shortages; limitations on store or facility operations up to and including closures; and other governmental, business or consumer actions.
In response to COVID-19, we expanded our associate pay and benefits to provide additional paid time off, weekly bonuses and other benefits. To continue to support our associates, we transitioned away from these temporary programs and implemented permanent compensation enhancements for frontline, hourly associates beginning in the third quarter of fiscal 2020. These expanded pay and benefits are included in SG&A in the consolidated statements of earnings.
Use of Estimates
We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with GAAP. While we believe these estimates and assumptions are reasonable, actual results could differ from these estimates, including changes due to uncertainty in the current economic environment resulting from the COVID-19 pandemic.
Cash Equivalents
We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Our cash equivalents are carried at fair market value and consist primarily of money market funds.
Receivables
The components of receivables, net, follow:
in millions January 31,
2021 February 2,
2020
Card receivables $ 992 $ 778 Rebate receivables 987 668 Customer receivables 571 292 Other receivables 442 368
Receivables, net $ 2,992 $ 2,106
Card receivables consist of payments due from financial institutions for the settlement of credit card and debit card transactions. Rebate receivables represent amounts due from vendors for volume and co-op advertising rebates. Customer receivables relate to credit extended directly to certain customers in the ordinary course of business. The
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valuation allowance related to these receivables was not material to our consolidated financial statements at the end of fiscal 2020 or fiscal 2019.
Merchandise Inventories
The majority of our merchandise inventories are stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). As the inventory retail value is adjusted regularly to reflect market conditions, inventory valued using the retail method approximates the lower of cost or market. Certain subsidiaries, including retail operations in Canada and Mexico, and distribution centers, record merchandise inventories at the lower of cost or net realizable value, as determined by a cost method. These merchandise inventories represent approximately 36% of the total merchandise inventories balance. We evaluate the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or net realizable value. The valuation allowance for merchandise inventories valued under a cost method was not material to our consolidated financial statements at the end of fiscal 2020 or fiscal 2019.
Physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that amounts reflected in merchandise inventories are properly stated. Shrink (or in the case of excess inventory, swell) is the difference between the recorded amount of inventory and the physical inventory count. We calculate shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. Due to changes in operating conditions during fiscal 2020 as a result of the COVID-19 pandemic, we used the results from a sample of stores that were able to conduct physical inventories as a basis for estimating shrink for those stores at which physical inventory counts were temporarily suspended during the year. We believe the sample of stores that were selected for inventory counts in the current year provides a reasonable basis for estimating shrink where a physical inventory count was not performed in fiscal 2020. Historically, the difference between estimated shrink and actual inventory losses has not been material to our annual financial results.
Property and Equipment
Buildings, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements are amortized using the straight-line method over the original term of the lease or the useful life of the improvement, whichever is shorter.
The estimated useful lives of our property and equipment follow:
Life
Buildings 5 – 45 years Furniture, fixtures and equipment 2 – 20 years Leasehold improvements 5 – 45 years
We capitalize certain costs, including interest, related to construction in progress and the acquisition and development of software. Costs associated with the acquisition and development of software are amortized using the straight-line method over the estimated useful life of the software, which is three to six years. Certain development costs not meeting the criteria for capitalization are expensed as incurred.
We evaluate our long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, our decision to relocate or close a store or other location before the end of its previously estimated useful life, or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated for recoverability by comparing its undiscounted future cash flows with its carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset’s fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment losses on property and equipment are recorded as a component of SG&A. Impairment charges for long- lived assets were not material to our consolidated financial statements in fiscal 2020, fiscal 2019, or fiscal 2018.
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Leases
On February 4, 2019, we adopted the new leases standard using the modified retrospective transition method.
We enter into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement, and are accounted for accordingly. Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration. We assess whether an arrangement is or contains a lease at inception of the contract.
We lease certain retail locations, warehouse and distribution space, office space, equipment, and vehicles. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for five-year terms. Some of our leases may include the option to terminate in less than five years. The lease term used to calculate the right-of-use asset and lease liability at commencement includes the impacts of options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When determining whether it is reasonably certain that we will exercise an option at commencement, we consider various existing economic factors, including market conditions, real estate strategies, the nature, length, and terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Based on these determinations, we generally conclude that the exercise of renewal options would not be reasonably certain in determining the lease term at commencement.
The discount rate used to calculate the present value of lease payments is the rate implicit in the lease, when readily determinable. As the rate implicit in the lease is rarely readily determinable, we use a secured incremental borrowing rate, which is updated on a quarterly basis, as the discount rate for the present value of lease payments.
Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under our lease agreements. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligation for those payments is incurred. Certain of our lease agreements also include rental payments based on an index or rate and others include rental payments based on a percentage of sales. For variable payments dependent upon an index or rate, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the measurement of our lease liabilities as they cannot be reasonably estimated, and are recognized in the period in which the obligation for those payments is incurred.
Leases that have a term of twelve months or less upon commencement are considered short-term in nature. Accordingly, short-term leases are not included on the consolidated balance sheets and are expensed on a straight- line basis over the lease term. We have also elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Business Combinations
The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair values of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired. We do not amortize goodwill, but assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. Each fiscal year, we may assess qualitative factors to determine whether it is more likely than
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