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## Property and Equipment 

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over estimated useful lives. Depreciation expense for the years 2003, 2002 and 2001 was $1,286 million, $1,183 million and $1,049 million, respectively. Accelerated depreciation methods are generally used for income tax purposes. Repair and maintenance costs were $453 million, $416 million and $386 million in 2003, 2002 and 2001, respectively. 

Estimated useful lives by major asset category are as follows: 

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We adopted SFAS No. 144, GLYPH<210>Accounting for the Impairment or Disposal of Long-Lived AssetsGLYPH<211> in the first quarter of 2002. In accordance with this guidance, all long-lived assets are reviewed when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The requirements of SFAS No. 144 are discussed in ManagementGLYPH<213>s Discussion and Analysis on page 25. 

We review most assets at the store level, which is the lowest level of assets for which there are identifiable cash flows. The carrying amount of the store assets is compared to the expected undiscounted future cash flows to be generated by those assets over the estimated remaining useful life of the primary asset. Cash flows are projected for each store based upon historical results and expectations. In cases where the expected future cash flows and fair value are less than the carrying amount of the assets, those stores are considered impaired and the assets are written down to fair value. Fair value is based on appraisals or other reasonable methods to estimate fair value. Impairment losses are included in depreciation expense for held and used assets and included within selling, general and administrative expense on assets classified as held for sale. Our fixed asset impairment tests, performed in accordance with the applicable accounting guidance, assumed each of our segments would continue indefinitely. Changes in these assumptions could impact the results of our analysis. In both 2003 and 2002, impairment losses resulted in a financial statement impact of less than $.01 per share. 

## Goodwill and Intangible Assets 

Goodwill and intangible assets are recorded within other long-term assets at cost less accumulated amortization. Amortization is computed on intangible assets with definite useful lives using the straight-line method over estimated useful lives that range from three to fifteen years. Amortization expense for the years 2003, 2002 and 2001 was $34 million, $29 million and $30 million, respectively. At January 31, 2004 and February 1, 2003, net good- will and intangible assets were $364 million and $376 million, respectively. These assets included $155 million of goodwill and intangible assets with indefinite useful lives in both years, principally associated with Marshall FieldGLYPH<213>s and target.direct. 

As required, we adopted SFAS No. 142, GLYPH<210>Goodwill and Other Intangible Assets,GLYPH<211> during the first quarter of 2002. In 2003 and 2002, the adoption of this statement reduced annual amortization expense by approximately $10 million (less than $.01 per share). The requirements of SFAS No. 142 are discussed in ManagementGLYPH<213>s Discussion and Analysis on page 25. 

Discounted cash flow models were used in determining fair value for the purposes of the required annual goodwill impairment analysis. Management used other market data to validate the results of our analysis. No impairments were recorded in 2003, 2002 and 2001 as a result of the tests performed. 

## Other Long-term Assets 

In addition to goodwill and intangible assets discussed above, the major components of other long-term assets at January 31, 2004 included pre-funded pension benefits, investments, deferred financing costs and derivatives. The increase in the long-term asset balance is primarily due to pre-funded pension contributions of $200 million partially offset by a $43 million reduction in the value of derivative assets that were outstanding at year-end. Our pension plan contributions are disclosed on page 36 and our derivative transactions are discussed on pages 33-34. 

## Accounts Payable 

Our accounting policy is to reduce accounts payable when checks to vendors clear the bank from which they were drawn. Out- standing checks included in accounts payable were $1,325 million and $1,125 million at year-end 2003 and 2002, respectively. 

## Lines of Credit 

At January 31, 2004, two committed credit agreements totaling $1.6 billion were in place through a group of 26 banks at specified rates. There were no balances outstanding at any time during 2003 or 2002 under these agreements. 

## Commitments and Contingencies 

At January 31, 2004, our obligations included notes payable, notes and debentures of $10,925 million (discussed in detail under Long- term Debt and Notes Payable on page 33) and the present value of capital and operating lease obligations of $158 million and $998 million, respectively (discussed in detail under Leases on page 34). In addition, commitments for the purchase, construction, lease or remodeling of real estate, facilities and equipment were approxi- mately $545 million at year-end 2003. Royalty commitments of approximately $80 million are due during the three-year period ending in 2007. Throughout the year, we enter into various com- mitments to purchase inventory. In addition to the accounts payable reflected in our Statements of Financial Position on page 27, we had commitments with various vendors for the purchase of inventory as of January 31, 2004. These purchase commitments are cancelable by their terms. 

