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Profit Share Buy-Out
12 Months Ended
Mar. 03, 2012
Profit Share Buy-Out Disclosure [Abstract]  
Profit Share Buy-Out
Profit Share Buy-Out

During fiscal 2008, we entered into a profit-sharing agreement with Carphone Warehouse Group plc ("Carphone Warehouse") (the "profit share agreement"). Under the terms of this agreement, Carphone Warehouse provided expertise and certain other resources to enhance our mobile telephone retail business ("Best Buy Mobile") in return for a share of incremental profits generated in excess of defined thresholds.
During fiscal 2009, we acquired a 50% controlling interest in the retail business of Carphone Warehouse, subsequently renamed Best Buy Europe Distributions Limited ("Best Buy Europe"), which included the profit share agreement with Best Buy Mobile. Carphone Warehouse holds a 50% noncontrolling interest in Best Buy Europe. Following the acquisition of Best Buy Europe, payments made by Best Buy Mobile to Best Buy Europe were recorded as SG&A expense in Best Buy Mobile (Domestic segment), and an SG&A reduction in Best Buy Europe (International segment). Carphone Warehouse's 50% share of the net earnings of Best Buy Europe, which includes the profit share agreement, is recorded in Net (earnings) from continuing operations attributable to noncontrolling interests within our Consolidated Statements of Earnings.

In November 2011, we announced strategic changes in respect of Best Buy Europe, including an agreement to buy out Carphone Warehouse's interest in the profit share agreement for $1,303 (the "Mobile buy-out"), subject to the approval of Carphone Warehouse shareholders. The Mobile buy-out was completed during the fourth quarter of fiscal 2012.

Financial Reporting Impact of the Mobile Buy-out

We accounted for the Mobile buy-out transaction as a $1,303 payment to terminate the future payments due under the profit share agreement with Best Buy Europe, thereby eliminating Carphone Warehouse's interest in the profits. This payment was presented within Net (earnings) from continuing operations attributable to noncontrolling interests in our Consolidated Statements of Earnings, consistent with the financial reporting of the previous recurring payments made pursuant to the profit share agreement. In the Consolidated Statements of Cash Flows, the payment to Carphone Warehouse is included within Payment to noncontrolling interest, as part of cash flows from financing activities.

Goodwill Impairment – Best Buy Europe

The Best Buy Europe reporting unit comprises our 50% controlling interest in Best Buy Europe, which includes the profit share agreement with Best Buy Mobile. Based upon the preliminary purchase price allocation for the Best Buy Europe acquisition in the second quarter of fiscal 2009, we recorded $1,491 of goodwill. The goodwill balance attributable to our Best Buy reporting unit has fluctuated over time as a result of changes in foreign currency exchange rates. No impairment had been recorded through the end of the third quarter of fiscal 2012.

At the time of the announcement of the Mobile buy-out in November 2011, we also announced the closure of our large-format Best Buy branded stores in the U.K. As of the end of the third quarter of fiscal 2012 and in light of these strategic decisions, we performed an interim evaluation of potential impairment of goodwill associated with the Best Buy Europe reporting unit. The fair value of the reporting unit, which reflected the exit plans for our large-format Best Buy branded stores in the U.K. and the fair value of the profit share agreement indicated by the Mobile buy-out price agreed upon with Carphone Warehouse, was determined to be in excess of the carrying value of the Best Buy Europe reporting unit as of the end of the third quarter of fiscal 2012. However, if the shareholders of Carphone Warehouse were to approve the Mobile buy-out, we estimated that substantially all of the goodwill associated with the Best Buy Europe reporting unit would be impaired in the absence of forecast cash flows to the reporting unit under the profit share agreement.

On January 24, 2012, the shareholders of Carphone Warehouse approved the Mobile buy-out and thus the transaction became unconditional. We conducted an impairment review of the goodwill associated with the Best Buy Europe reporting unit as of this date. Following the elimination of the profit share agreement from Best Buy Europe and the closure of large-format Best Buy branded stores in the U.K., the remaining fair value of the Best Buy Europe reporting unit is entirely attributable to its small-format store retail operations. Management determined the fair value of the reporting unit by reference to estimated future cash flows discounted to present value using a discount rate of 9.0%. The reporting unit fair value determined was also corroborated by reference to market data. The fair value determined was less than the carrying value of Best Buy Europe, and therefore further analysis was conducted to determine the implied fair value of goodwill. This included first determining the fair value of all identifiable tangible and intangible assets and liabilities attributable to Best Buy Europe, in a manner consistent with purchase accounting methodology. Once complete, the aggregate fair value of all assets and liabilities was compared to the reporting unit fair value determined, to ascertain the implied fair value of goodwill. Based on this analysis, it was determined that goodwill attributable to the Best Buy Europe reporting unit, representing $1,207 as of January 24, 2012, had been fully impaired. The impairment loss was recorded in the Goodwill impairment line within our Consolidated Statements of Earnings in the fourth quarter of fiscal 2012.

Acceleration of Intervening Event

The results of Best Buy Europe are recorded on a two-month lag. However, as described in Note 1, Summary of Significant Accounting Policies, the Mobile buy-out in January 2012 constituted a significant intervening event. Consequently, the recording of all accounting impacts arising from the Mobile buy-out, including the goodwill impairment, was accelerated and recorded in the fourth quarter of fiscal 2012 due to their significance to our consolidated financial statements.