MD&A pg 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 
 

Significant Accounting Matters
During fiscal 2003, certain accounting matters significantly impacted our reported financial results and related presentation.

In fiscal 2003, we recorded the significant non-cash charges summarized in the table below ($ in millions):
Significant Fiscal 2003 
Non-Cash Charges, Net of Tax

Continuing 
Operations

Discontinued Operations


Total
Cumulative effect of change in accounting principle for goodwill $40 $308 $348
Long-lived asset impairment charge — 102 102
Cumulative effect of change in accounting principle for vendor allowances 42 8 50
Significant fiscal 2003 non-cash charges, net of tax $82 $418 $500
The $348 million goodwill impairment charge relates to our adoption of SFAS No. 142, Goodwill and Other Intangible Assets, at the beginning of fiscal 2003. In accordance with SFAS No. 142, we completed the required goodwill impairment testing in the second quarter of fiscal 2003. As a result of the testing, we determined that the asset carrying value of our Musicland and Magnolia Hi-Fi businesses exceeded their current fair values. The resulting after-tax, non-cash impairment charge was $348 million ($1.07 per diluted share), of which $308 million was associated with Musicland and $40 million was associated with Magnolia Hi-Fi. The charge represented a complete write-off of the goodwill associated with these businesses. For additional information regarding the change in accounting for goodwill, refer to Change in Accounting Principles – Goodwill and Vendor Allowances in note 1 in the Notes to Consolidated Financial Statements.

During the fourth quarter of fiscal 2003, we incurred a $102 million after-tax, non-cash impairment charge ($166 million before tax), related to a reassessment of the carrying value of Musicland's long-lived assets, in accordance with SFAS No. 144. We included this non-cash charge in discontinued operations.

During fiscal 2003, we changed our method of accounting for vendor allowances in accordance with Emerging Issues Task Force (EITF) Issue No. 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor. The adoption of EITF No. 02-16 was accounted for as a cumulative effect of a change in accounting principle effective on March 3, 2002, the beginning of fiscal 2003. The cumulative effect of the change in accounting for vendor allowances resulted in an after-tax, non-cash, charge to net earnings of $50 million, of which $8 million was associated with Musicland and included in discontinued operations. >>
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