Financial Statements of - Shoppers Drug Mart

SHOPPERS DRUG MART CORPORATION
Notes to the Consolidated Financial Statements
(unaudited)
(in thousands of Canadian dollars, except per share data)
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
The determination of fair values, particularly for intangible assets, is based on management’s
estimates and includes assumptions on the timing and amount of future cash flows. The Company
recognizes as goodwill the excess of the purchase price of an acquired business over the fair value of
the underlying net assets, including intangible assets, at the date of acquisition. Transaction costs are
expensed as incurred. The date of acquisition is the date on which the Company obtains control over
the acquired business.
(k) Inventory
Inventory is comprised of merchandise inventory, which includes prescription inventory, and is
valued at the lower of cost and estimated net realizable value. Cost is determined on the first-in, firstout
basis. Cost includes all direct expenditures and other appropriate costs incurred in bringing
inventory to its present location and condition. The Company classifies rebates and other
consideration received from a vendor as a reduction to the cost of inventory unless the rebate relates
to the reimbursement of a selling cost or a payment for services.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated
selling expenses.
(l) Property and Equipment
(i)
Recognition and Measurement
Items of property and equipment are measured at cost less accumulated depreciation and any
recognized impairment losses (see (p) Impairment).
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition for their intended use and, where applicable,
the costs of dismantling and removing the items and restoring the site on which they were located.
Borrowing costs are recognized as part of the cost of an asset, where appropriate.
Purchased software that is integral to the functionality of the related equipment is capitalized as part
of that equipment.
When components of property and equipment have different useful lives, they are accounted for as
separate items of property and equipment.
Gains and losses on disposal of an item of property and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property and equipment and are recognized net,
within operating and administrative expenses, in net earnings.
Fully-depreciated items of property and equipment that are still in use continue to be recognized in
cost and accumulated depreciation.
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