Property and Equipment, Net

9 Months Ended

Nov. 02, 2013

Property, Plant and Equipment [Abstract]

Property and equipment, net, consisted of (in thousands):



	November 2, 2013			February 2, 2013
Property and equipment, at cost	$	2,986,429		$	2,915,072
Accumulated depreciation and amortization	(1,825,525		)	(1,606,840		)
Property and equipment, net	$	1,160,904		$	1,308,232

Long-lived assets, primarily comprised of property and equipment, are reviewed periodically for impairment or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Factors used in the evaluation include, but are not limited to, management’s plans for future operations, recent operating results, and projected cash flows.

In accordance with Accounting Standards Codification 820-10, “Fair Value Measurements and Disclosures,” store-related assets are considered level 3 assets in the fair value hierarchy. Fair values are determined at the store level, primarily using a discounted cash flow model. The estimation of future cash flows from operating activities requires significant estimates of factors that include future sales, gross margin performance and operating expenses. In instances where the discounted cash flow analysis indicates a negative value at the store level, and impairment charges are taken, the market exit price based on historical experience is used to determine the fair value by asset type.

In the third quarter of Fiscal 2013, the Company incurred non-cash asset impairment charges of $43.6 million, as a result of the impact of current sales trends on the profitability of a number of stores. The asset impairment charges are primarily related to 23 Abercrombie & Fitch stores, three abercrombie kids stores and 70 Hollister stores.

The following table presents quantitative information related to the unobservable inputs used in the Company's level 3 fair value measurements for the impairment charges incurred in the third quarter of Fiscal 2013.



UNOBSERVABLE INPUT	VALUE
Weighted average cost of capital ⁽¹⁾	11%
Annual revenue growth rates ⁽²⁾	2%


⁽¹⁾	The Company utilized the year-end weighted average cost of capital in the discounted cash flow model.


⁽²⁾	The Company utilized an annual revenue growth rate in the discounted cash flow model.

See Note 17, "GILLY HICKS RESTRUCTURING," for reference on impairment charges incurred in relation to the decision to close the stand-alone Gilly Hicks stores.

In certain lease arrangements, the Company is involved in the construction of the building. If it is determined that the Company has substantially all of the risks of ownership during construction of the leased property and therefore is deemed to be the owner of the construction project, the Company records an asset for the amount of the total project costs and an amount related to the value attributed to the pre-existing, leased building in Property and Equipment, Net and the related financing obligation in Leasehold Financing Obligations on the Consolidated Balance Sheets. Once construction is complete, if it is determined that the asset does not qualify for sale-leaseback accounting treatment, the Company continues to amortize the obligation over the lease term and depreciates the asset over its useful life. The Company had $52.8 million and $55.2 million of construction project assets in Property and Equipment, Net at November 2, 2013 and February 2, 2013, respectively.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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