NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment are stated at historical cost. The historical cost of acquiring an asset includes the costs incurred to bring it to the condition and location necessary for its intended use. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. The useful life of fixtures and equipment ranges from three to 15 years and that of certain components of building improvements and buildings from 10 to 25 years. Leasehold improvements are amortized over the shorter of the life of the improvement or the expected term of the lease. In some locations, leasehold improvements are amortized over a period longer than the initial lease term where management believes it is reasonably assured that the renewal option in the underlying lease will be exercised because an economic penalty may be incurred if the option is not exercised. The sale or purchase of property and equipment is recognized upon legal transfer of property.

Property and equipment consist of the following (in thousands):



	August 31,		August 31,
	2016		2015
Land	$	131,896	$	128,071
Building and improvements		305,420		278,982
Fixtures and equipment		186,409		164,916
Construction in progress		46,861		26,679
Total property and equipment, historical cost		670,586		598,648
Less: accumulated depreciation		(197,541)		(165,608)
Property and equipment, net	$	473,045	$	433,040

Depreciation and amortization expense (in thousands):



	Years Ended August 31,
	2016		2015		2014
Depreciation and amortization expense	$	39,794	$	34,445	$	28,475

The Company capitalizes interest on expenditures for qualifying assets over a period that covers the duration of the activities required to get the asset ready for its intended use, provided that expenditures for the asset have been made and interest cost is being incurred. Interest capitalization continues as long as those activities and the incurrence of interest cost continue. The amount capitalized in an accounting period is determined by applying the capitalization rate (average interest rate) to the average amount of accumulated expenditures for the qualifying asset during the period. The capitalization rates are based on the interest rates applicable to borrowings outstanding during the period.

Total interest capitalized (in thousands):

Total interest capitalized (in thousands):



	Years Ended August 31,
	2016		2015		2014
Interest capitalized	$	1,082	$	1,055	$	1,482

A summary of asset disposal activity for fiscal years 2016, 2015 and 2014 is as follows (in thousands):



	Historical Cost		Accumulated Depreciation		Proceeds from disposal		Gain/(Loss) recognized
Fiscal Year 2016	$	7,578	$	6,330	$	86	$	(1,162)
Fiscal Year 2015	$	11,740	$	9,367	$	368	$	(2,005)
Fiscal Year 2014	$	14,733	$	13,146	$	142	$	(1,445)

The Company constructed a new warehouse club on land acquired in May 2015 in Chia, Colombia that opened in September 2016, fiscal year 2017 bringing the total of warehouse clubs operating in Colombia to seven. On December 4, 2015 the Company signed an option to acquire two properties and then swap them for 59,353 square feet of land adjacent to the Company’s San Pedro Sula warehouse club in Honduras. The parcels of land exchanged are all undeveloped contiguous land parcels that make them similar in all respects. The transaction was completely nonmonetary in nature, and the transaction did not generate any gain recognition. The accounting basis of the new property equals $1.9 million (the net book value of the real estate exchanged). The Company exercised this option and completed the swap during May 2016. The Company will use the acquired land to expand the parking lot for the San Pedro Sula warehouse club. In March 2016, the Company entered into a contract, subject to customary contingencies, to acquire a distribution center in Medley, Miami-Dade County, Florida, where we will transfer the majority of our current Miami distribution center activities once the construction of the building is complete and the building is ready for occupancy. The Company expects construction to be completed in first half of calendar 2017.

The Company also recorded within accounts payable and other accrued expenses approximately $280,000 and $1.7 million as of August 31, 2016 and $458,000 million and $1.5 million as of August 31, 2015 of liabilities related to the acquisition and/or construction of property and equipment, respectively.

Balance as of

August 31,

August 31,

Total interest capitalized