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Goodwill and intangibles | 6 Months Ended
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Aug. 04, 2018
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and intangibles | Goodwill and intangibles In connection with the acquisition of R2Net on September 12, 2017, the Company recognized $299.1 million of goodwill, which is reported in the North America segment. Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions were to indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded. Due to a sustained decline in the Company’s market capitalization during the 13 weeks ended May 5, 2018, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite-lived intangible assets. As part of the assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections associated with finalizing certain initial aspects of the Company’s Path to Brilliance transformation plan in the first quarter, resulted in lower than previously projected long-term future cash flows for the reporting units which negatively affected the valuation compared to previous valuations. Due to the inherent uncertainties involved in making the estimates and assumptions used in the fair value analysis, actual results may differ, which could alter the fair value of the reporting units and trade names, and possibly result in impairment charges in future periods. As a result of the interim impairment assessment, the Company recognized pre-tax impairment charges totaling $448.7 million in the 13 weeks ended May 5, 2018. Goodwill Using a combination of discounted cash flow and guideline public company methodologies, the Company compared the fair value of each of its reporting units with their carrying value and concluded that a deficit existed. Accordingly, in the 13 weeks ended May 5, 2018, the Company recognized pre-tax impairment charges in operations of $23.2 million and $285.6 million at its’ legacy Sterling Jewelers and Zale Jewelry segments, which are within the Company’s current North America segment. The following table summarizes the Company’s goodwill by reportable segment:
(in millions) |  | North America |  | Other |  | Total
Balance at January 28, 2017 |  | $ | 514.0 |  |  | $ | 3.6 |  |  | $ | 517.6 |
Acquisitions |  | 301.7 |  |  | — |  |  | 301.7 |
Impact of foreign exchange and other adjustments |  | 2.4 |  |  | — |  |  | 2.4 |
Balance at February 3, 2018 |  | 818.1 |  |  | 3.6 |  |  | 821.7 |
Impairment |  | (308.8 | ) |  | — |  |  | (308.8 | )
Impact of foreign exchange and other adjustments (1) |  | (3.9 | ) |  | — |  |  | (3.9 | )
Balance at August 4, 2018 |  | $ | 505.4 |  |  | $ | 3.6 |  |  | $ | 509.0 |
(1) | During the 26 weeks ended May 5, 2018, other adjustments include a purchase price accounting adjustment of $2.6 million related to a revised valuation of acquired intangible assets from the R2Net acquisition. Refer to Note 5 for additional details.
Intangibles Definite-lived intangible assets include trade names and favorable lease agreements. Indefinite-lived intangible assets include trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net on the consolidated balance sheets. Intangible liabilities, net is comprised of unfavorable lease agreements and contracts and is recorded within other liabilities on the consolidated balance sheets. In conjunction with the interim goodwill impairment tests, the Company reviewed its indefinite-lived intangible assets for potential impairment by calculating the fair values of the assets using the relief from royalty method and comparing the fair value to their respective carrying amounts. The interim impairment test resulted in the determination that the fair values of indefinite-lived intangible assets related to certain Zales trade names were less than their carrying value. Accordingly, in the 13 weeks ended May 5, 2018, the Company recognized pre-tax impairment charges in operations of $139.9 million at its’ legacy Zale Jewelry segment, which is within the Company’s current North America segment. The following table provides additional detail regarding the composition of intangible assets and liabilities:
|  | August 4, 2018 |  | February 3, 2018 |  | July 29, 2017
(in millions) |  | Gross carrying amount |  | Accumulated amortization |  | Accumulated impairment loss |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
Intangible assets, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Definite-lived intangible assets |  | 53.4 |  |  | (48.6 | ) |  | — |  |  | 4.8 |  |  | 49.8 |  |  | (46.7 | ) |  | 3.1 |  |  | 49.8 |  |  | (43.6 | ) |  | 6.2 |
Indefinite-lived intangible assets |  | 476.2 |  |  | — |  |  | (139.7 | ) |  | 336.5 |  |  | 478.4 |  |  | — |  |  | 478.4 |  |  | 407.7 |  |  | — |  |  | 407.7 |
Total intangible assets, net |  | $ | 529.6 |  |  | $ | (48.6 | ) |  | $ | (139.7 | ) |  | $ | 341.3 |  |  | $ | 528.2 |  |  | $ | (46.7 | ) |  | $ | 481.5 |  |  | $ | 457.5 |  |  | $ | (43.6 | ) |  | $ | 413.9 |
Intangible liabilities, net |  | $ | (114.0 | ) |  | $ | 88.8 |  |  | $ | — |  |  | $ | (25.2 | ) |  | $ | (114.5 | ) |  | $ | 85.2 |  |  | $ | (29.3 | ) |  | $ | (114.5 | ) |  | $ | 80.5 |  |  | $ | (34.0 | )
During the second quarter of Fiscal 2019, the Company performed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names identified in the Zale acquisition, for impairment indicators. No indicators were identified during this assessment indicating that it is more likely than not that impairment in excess of the amount recorded during the 13 weeks ended May 5, 2018 exists.

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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