2007 Annual Report - Ameristar Casinos, Inc.

InventoriesInventories primarily consist of food and beverage items, gift shop and general store retail merchandise,engineering and slot supplies, uniforms, linens, china and other general supplies. Inventories are stated at the lowerof cost or market. Cost is determined principally on the weighted average basis.Capitalization and depreciationProperty and equipment are recorded at cost, including interest charged on funds borrowed to financeconstruction. Interest of $19.9 million, $8.1 million and $5.0 million was capitalized for the years ended December31, 2007, 2006 and 2005, respectively. Betterments, renewals and repairs that extend the life of an asset arecapitalized. Ordinary maintenance and repairs are charged to expense as incurred. Costs of major renovation projectsare capitalized in accordance with existing policies.Depreciation is provided on the straight-line method. Amortization of building and furniture, fixtures andequipment under capitalized leases is provided over the shorter of the estimated useful life of the asset or the term ofthe associated lease (including lease renewals or purchase options the Company expects to exercise). Depreciationand amortization is provided over the following estimated useful lives:Buildings and improvements....................Furniture, fixtures and equipment ............5 to 40 years2 to 15 yearsImpairment of long-lived assetsThe Company reviews long-lived assets for impairment in accordance with Statement of Financial AccountingStandards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicatethat the book value of the asset may not be recoverable. The Company reviews long-lived assets for such events orchanges in circumstances at each balance sheet date. If a long-lived asset is to be held and used, the Companyassesses recoverability based on the future undiscounted cash flows of the related asset over the remaining lifecompared to the asset’s book value. If an impairment exists, the asset is adjusted to fair value based on quotedmarket prices or another valuation technique, such as discounted cash flow analysis. If a long-lived asset is to besold, the asset is reported at the lower of carrying amount or fair value less cost to sell, with fair value measured asdiscussed above.Goodwill and other intangible assetsGoodwill represents the excess of the purchase price over fair market value of net assets acquired in businesscombinations. Other intangible assets may include gaming licenses, trade names and player lists. Intangible assetsmust be reviewed for impairment at least annually and more frequently if events or circumstances indicate a possibleimpairment. The Company performs an annual review of goodwill and indefinite-lived intangible assets in the fourthquarter of each fiscal year. No impairments were identified as a result of the annual impairment reviews for any ofthe intangible assets in 2007, 2006 and 2005. See also “Note 11 - Goodwill and Other Intangible Assets.”Debt issuance costsDebt issuance costs are capitalized and amortized to interest expense using the effective interest method or amethod that approximates the effective interest method over the term of the related debt instrument. In connectionwith the September 2007 acquisition of Resorts East Chicago, the Company amended its senior credit facility andcapitalized $3.7 million in amendment fees and other debt issuance costs. As of December 31, 2007 and 2006, totalcapitalized debt issuance costs remaining to be amortized were $6.5 million and $4.3 million, respectively.The Company expenses debt issuance costs ratably in connection with any early debt retirements. In February2006, the Company redeemed all $380.0 million outstanding principal amount of its senior subordinated notes. Theredemption resulted in the expensing in 2006 of all unamortized debt issuance costs relating to the seniorsubordinated notes. For the year ended December 31, 2006, the total previously deferred debt issuance costsexpensed as a result of the early retirement of debt were $5.8 million.F-9