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Acquisition
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12 Months Ended |
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Jan. 28, 2012
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| Acquisition [Abstract] | |
| Acquisition | 4) Acquisition
On November 2, 2011, we completed an acquisition, pursuant to the asset purchase agreement dated October 12, 2011 (Purchase Agreement), to acquire the worldwide rights for the Liz Claiborne family of trademarks and related intellectual property, as well as the U.S. and Puerto Rico rights for the Monet trademarks and related intellectual property. We have been the primary exclusive licensee for all Liz Claiborne and Claiborne branded merchandise in the U.S. and Puerto Rico since August 2010 under an original 10-year license agreement dated October 5, 2009. As a result of the acquisition, w permanently added a number of well-established trademarks to our private and exclusive brands.
We allocated the purchase price of the acquisition to identifiable intangible assets based on their estimated fair values. Intangible assets were valued using the relief from royalty and discounted cash flow methodologies which are considered Level 3 fair value measurements. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible assets. Key assumptions used in this model include discount rates, royalty rates, growth rates and sales projections. Discount rates, royalty rates, growth rates and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates and cash flow projections. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment.
The consideration paid for the brands was $268 million with the entire purchase price allocated to the calculated fair values of the acquired trade names and recorded as intangible assets with indefinite lives at the acquisition date. We incurred an insignificant amount of direct transaction costs as a result of this acquisition. Pro forma financial information has not been provided as the acquisition did not have a material impact on our financial information.
We assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or changes in circumstances indicate that the carrying amount of the indefinite-lived intangible asset may not be fully recoverable. We test for indefinite-lived intangible asset impairments during the fourth quarter of our fiscal year using our third quarter balances. We measure the recoverability of the indefinite-lived intangible asset by a comparison of the carrying value over its fair value. Any excess of the carrying value over its fair value is recognized as an impairment loss.
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