Document Information Statement - USD ($) $ in Billions	12 Months Ended
Document Information Statement - USD ($) $ in Billions	Feb. 01, 2020	Mar. 18, 2020	Aug. 02, 2019
Document Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Feb. 01, 2020
Document Fiscal Year Focus	2020
Current Fiscal Year End Date	--02-01
Document Transition Report	false
Entity File Number	1-9595
Entity Registrant Name	BEST BUY CO., INC.
Entity Incorporation, State or Country Code	MN
Entity Address, Address Line One	7601 Penn Avenue South
Entity Address, City or Town	Richfield
Entity Address, State or Province	MN
Entity Tax Identification Number	41-0907483
Entity Address, Postal Zip Code	55423
City Area Code	612
Local Phone Number	291-1000
Title of 12(b) Security	Common Stock, $0.10 par value per share
Trading Symbol	BBY
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 13.9
Entity Common Stock, Shares Outstanding		256,971,220
Documents Incorporated by Reference [Text Block]	Portions of the registrant's Definitive Proxy Statement relating to its 2020 Regular Meeting of Shareholders ("Proxy Statement") are incorporated by reference into Part III. The Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. ‎
Document Fiscal Period Focus	FY
Entity Central Index Key	0000764478
Amendment Flag	false

Consolidated Balance Sheets - USD ($) $ in Millions	Feb. 01, 2020	Feb. 02, 2019
Current assets
Cash and cash equivalents	$ 2,229	$ 1,980
Receivables, net	1,149	1,015
Merchandise inventories	5,174	5,409
Other current assets	305	466
Total current assets	8,857	8,870
Property and equipment
Land and buildings	650	637
Leasehold improvements	2,203	2,119
Fixtures and equipment	6,286	5,865
Property under capital and financing leases		579
Property under finance leases	89
Gross property and equipment	9,228	9,200
Less accumulated depreciation	6,900	6,690
Net property and equipment	2,328	2,510
Operating lease assets	2,709
Goodwill	984	915
Other assets	713	606
Total assets	15,591	12,901
Current liabilities
Accounts payable	5,288	5,257
Unredeemed gift card liabilities	281	290
Deferred revenue	501	446
Accrued compensation and related expenses	410	482
Accrued liabilities	906	982
Current portion of operating lease liabilities	660
Current portion of long-term debt	14	56
Total current liabilities	8,060	7,513
Long-term operating lease liabilities	2,138
Long-term liabilities	657	750
Long-term debt	1,257	1,332
Contingencies and commitments (Note 13)
Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none
Common stock, $0.10 par value: Authorized 1.0 billion shares; Issued and outstanding 256,494,000 and 265,703,000 shares, respectively	26	27
Additional paid-in capital
Retained earnings	3,158	2,985
Accumulated other comprehensive income	295	294
Total equity	3,479	3,306
Total liabilities and equity	$ 15,591	$ 12,901

Consolidated Balance Sheets (Parenthetical) - $ / shares	Feb. 01, 2020	Feb. 02, 2019
Consolidated Balance Sheets [Abstract]
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, authorized shares	400,000	400,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized shares	1,000,000,000.0	1,000,000,000.0
Common stock, issued shares	256,494,000	265,703,000
Common stock, outstanding shares	256,494,000	265,703,000

Consolidated Statements of Earnings - USD ($)
shares in Millions, $ in Millions

12 Months Ended

Feb. 01, 2020

Feb. 02, 2019

Feb. 03, 2018

Consolidated Statements of Earnings [Abstract]

Revenue

$ 43,638

$ 42,879

$ 42,151

Cost of sales

33,590

32,918

32,275

Gross profit

10,048

9,961

9,876

Selling, general and administrative expenses

7,998

8,015

8,023

Restructuring charges

41

46

10

Operating income

2,009

1,900

1,843

Other income (expense):

Gain on sale of investments

1

12

1

Investment income and other

47

49

48

Interest expense

(64)

(73)

(75)

Earnings from continuing operations before income tax expense

1,993

1,888

1,817

Income tax expense

452

424

818

Net earnings from continuing operations

1,541

1,464

999

Gain from discontinued operations, net of $0 tax expense

1

Net earnings

$ 1,541

$ 1,464

$ 1,000

Basic earnings per share

$ 5.82

^[1]

$ 5.30

^[1]

$ 3.33

Diluted earnings per share

$ 5.75

^[1]

$ 5.20

^[1]

$ 3.26

Weighted-average common shares outstanding

Basic

264.9

276.4

300.4

Diluted

268.1

281.4

307.1

[1]	The sum of our quarterly diluted earnings per share does not equal our annual diluted earnings per share due to differences in quarterly and annual weighted-average shares outstanding

Consolidated Statements of Earnings (Parenthetical) - USD ($)	12 Months Ended
	Feb. 01, 2020	Feb. 02, 2019	Feb. 03, 2018
Consolidated Statements of Earnings [Abstract]
Tax effect of discontinued operations	$ 0	$ 0	$ 0

- Definition

Amount of tax expense (benefit) related to a discontinued operation. Includes, but is not limited to, tax expense (benefit) related to income (loss) from operations during the phase-out period, tax expense (benefit) related to gain (loss) on disposal, tax expense (benefit) related to gain (loss) for reversal of write-down (write-down) to fair value, less cost to sell, and tax expense (benefit) related to adjustments of a prior period gain (loss) on disposal.

+ References + Details

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Feb. 01, 2020	Feb. 02, 2019	Feb. 03, 2018
Consolidated Statements of Comprehensive Income [Abstract]
Net earnings	$ 1,541	$ 1,464	$ 1,000
Foreign currency translation adjustments	1	(20)	35
Comprehensive income	$ 1,542	$ 1,444	$ 1,035

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Feb. 01, 2020	Feb. 02, 2019	Feb. 03, 2018
Operating activities
Net earnings	$ 1,541	$ 1,464	$ 1,000
Adjustments to reconcile net earnings to total cash provided by operating activities:
Depreciation and amortization	812	770	683
Restructuring charges	41	46	10
Stock-based compensation	143	123	129
Deferred income taxes	70	10	162
Other, net	21	(25)	(13)
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Receivables	(131)	28	315
Merchandise inventories	237	(194)	(335)
Other assets	16	(34)	(21)
Accounts payable	47	432	(196)
Income taxes	(132)	22	290
Other liabilities	(100)	(234)	117
Total cash provided by operating activities	2,565	2,408	2,141
Investing activities
Additions to property and equipment, net of $10, $53 and $123, respectively, of non-cash capital expenditures	(743)	(819)	(688)
Purchases of investments	(330)		(4,325)
Sales of investments	322	2,098	4,018
Acquisitions, net of cash acquired	(145)	(787)
Other, net	1	16	(7)
Total cash provided by (used in) investing activities	(895)	508	(1,002)
Financing activities
Repurchase of common stock	(1,003)	(1,505)	(2,004)
Issuance of common stock	48	38	163
Dividends paid	(527)	(497)	(409)
Borrowings of debt		498
Repayments of debt	(15)	(546)	(46)
Other, net	(1)	(6)	(1)
Total cash used in financing activities	(1,498)	(2,018)	(2,297)
Effect of exchange rate changes on cash	(1)	(14)	25
Increase (decrease) in cash, cash equivalents and restricted cash	171	884	(1,133)
Cash, cash equivalents and restricted cash at beginning of period	2,184	1,300	2,433
Cash, cash equivalents and restricted cash at end of period	2,355	2,184	1,300
Supplemental cash flow information
Income taxes paid	514	391	366
Interest paid	$ 62	$ 71	$ 81

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Feb. 01, 2020	Feb. 02, 2019	Feb. 03, 2018
Consolidated Statements of Cash Flows [Abstract]
Non-cash capital expenditures	$ 10	$ 53	$ 123

Consolidated Statements of Changes in Shareholders' Equity - USD ($) shares in Millions, $ in Millions	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Beginning balances at Jan. 28, 2017	$ 31		$ 4,399	$ 279	$ 4,709
Beginning balances (in shares) at Jan. 28, 2017	311
Increase (Decrease) in Shareholders' Equity
Net earnings			1,000		1,000
Other comprehensive income, net of tax:
Foreign currency translation adjustments				35	35
Stock-based compensation		$ 129			129
Issuance of common stock	$ 1	162			163
Issuance of common stock (in shares)	7
Common stock dividends			(411)		(411)
Repurchase of common stock	$ (4)	(299)	(1,706)		(2,009)
Repurchase of common stock (in shares)	(35)
Other		(2)			(2)
Ending balances at Feb. 03, 2018	$ 28		3,270	314	3,612
Ending balances (in shares) at Feb. 03, 2018	283
Increase (Decrease) in Shareholders' Equity
Cumulative effect of new accounting principle in period of adoption \| Accounting Standards Update 2016-02 [Member]		10	(12)		(2)
Net earnings			1,464		1,464
Other comprehensive income, net of tax:
Foreign currency translation adjustments				(20)	(20)
Stock-based compensation		123			123
Issuance of common stock		38			38
Issuance of common stock (in shares)	4
Common stock dividends		6	(497)		(491)
Repurchase of common stock	$ (1)	(167)	(1,325)		(1,493)
Repurchase of common stock (in shares)	(21)
Ending balances at Feb. 02, 2019	$ 27		2,985	294	3,306
Ending balances (in shares) at Feb. 02, 2019	266
Increase (Decrease) in Shareholders' Equity
Cumulative effect of new accounting principle in period of adoption \| Adoption of ASU 2014-09			73		73
Net earnings			1,541		1,541
Other comprehensive income, net of tax:
Foreign currency translation adjustments				1	1
Stock-based compensation		143			143
Issuance of common stock		48			48
Issuance of common stock (in shares)	4
Common stock dividends		9	(536)		(527)
Repurchase of common stock	$ (1)	(198)	(810)		(1,009)
Repurchase of common stock (in shares)	(14)
Other		$ (2)			(2)
Ending balances at Feb. 01, 2020	$ 26		3,158	$ 295	3,479
Ending balances (in shares) at Feb. 01, 2020	256
Increase (Decrease) in Shareholders' Equity
Cumulative effect of new accounting principle in period of adoption \| Adoption of ASU 2016-09			$ (22)		$ (22)

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Feb. 01, 2020	Feb. 02, 2019	Feb. 03, 2018
Consolidated Statements of Changes in Shareholders' Equity [Abstract]
Dividends declared per common share	$ 2.00	$ 1.80	$ 1.36

Summary of Significant Accounting Policies

12 Months Ended

Feb. 01, 2020

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Unless the context otherwise requires, the use of the terms "Best Buy," "we," "us" and "our" in these Notes to Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.

Description of Business

Our purpose is to enrich the lives of consumers through technology. We have two reportable segments: Domestic and International. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S. under various brand names including Best Buy, Best Buy Business, Best Buy Express, Best Buy Health, CST, Geek Squad, GreatCall, Lively, Magnolia and Pacific Kitchen and Home and the domain names bestbuy.com and greatcall.com. The International segment is comprised of all operations in Canada and Mexico under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and the domain names bestbuy.ca and bestbuy.com.mx.

On October 1, 2018, we acquired all of the outstanding shares of GreatCall, Inc. (“GreatCall”). On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (“CST”), and on August 7, 2019, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”). Refer to Note 2, Acquisitions, for additional information.

Basis of Presentation

The consolidated financial statements include the accounts of Best Buy Co., Inc. and its consolidated subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements. No significant intervening event occurred in these operations that would have materially affected our financial condition, results of operations, liquidity or other factors had it been recorded during fiscal 2020, fiscal 2019 or fiscal 2018.

Discontinued Operations

Discontinued operations in fiscal 2018 reflects the proceeds attributed to a non-compete clause from the sale of Best Buy Europe to Carphone Warehouse plc.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the consolidated financial statements, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Fiscal Year

Our fiscal year ends on the Saturday nearest the end of January. Fiscal 2020 and fiscal 2019 included 52 weeks and fiscal 2018 included 53 weeks, with the additional week occurring in the fourth quarter.

Unadopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of operating lease assets and lease liabilities on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted ASU 2016-02 using the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption were as originally reported under the previous standard – ASC 840, Leases. The effects of adopting the new standard (ASC 842, Leases) in fiscal 2020 were recognized as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal first quarter. We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification as operating or capital leases. We also elected to combine lease and non-lease components and to exclude short-term leases from our Consolidated Balance Sheets. We did not elect the hindsight practical expedient in determining the lease term for existing leases as of February 3, 2019.

The most significant impact of adoption was the recognition of operating lease assets and operating lease liabilities of $2.7 billion and $2.8 billion, respectively, while our accounting for existing capital leases (now referred to as finance leases) remained substantially unchanged. The cumulative impact of these changes decreased retained earnings by $22 million, which included a $3 million net-of-tax adjustment made during the second quarter of fiscal 2020 related to on-adoption impairment charges. We expect the impact of adoption to be immaterial to our consolidated statements of earnings and consolidated statements of cash flows on an ongoing basis. As part of our adoption, we also modified our control procedures and processes, none of which materially affected our internal control over financial reporting. See Note 10, Leases, for additional lease disclosures.

The cumulative effect of the changes made to our Consolidated Balance Sheets for the adoption of this standard was as follows ($ in millions):

				.

	February 2, 2019 ‎As Reported		ASU 2016-02 Adjustment on February 3, 2019			February 3, 2019 ‎As Reported
Assets
Other current assets	$	466	$	(65)	^(a)	$	401
Net property and equipment		2,510		(173)	^(b)		2,337
Operating lease assets		-		2,732	^(c)		2,732
Other assets		606		5	^(d)		611
Liabilities
Accrued liabilities		982		(28)	^(e)		954
Current portion of operating lease liabilities		-		712	^(f)		712
Current portion of long-term debt		56		(43)	^(b)		13
Long-term liabilities		750		(115)	^(e)		635
Long-term operating lease liabilities		-		2,135	^(f)		2,135
Long-term debt		1,332		(140)	^(b)		1,192
Equity
Retained earnings		2,985		(22)	^(g)		2,963

(a)Represents the reclassification of prepaid rent and leasehold acquisition costs to Operating lease assets.

(b)Represents the derecognition of financing obligations and reclassification to Operating lease assets.

(c)Represents the capitalization of operating lease assets and the reclassification of prepaid rent and leasehold acquisition costs, offset by the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves.

(d)Represents the deferred tax impact of the on-adoption adjustments.

(e)Represents the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves to Operating lease assets.

(f)Represents the recognition of Operating lease liabilities.

(g)Represents the net-of-tax retained earnings impact of impairment charges and the derecognition of financing obligations.

Segment Information

Our business is organized into two reportable segments: Domestic (which is comprised of all states, districts and territories of the U.S.) and International (which is comprised of all operations in Canada and Mexico). Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our CODM has ultimate responsibility for enterprise decisions, including determining resource allocation for, and monitoring the performance of, the consolidated enterprise, the Domestic reportable segment and the International reportable segment.

Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and reportable segment results to the operating income level. We aggregate our Best Buy Domestic and Best Buy Health operating segments into one Domestic reportable segment. We also aggregate our Canada and Mexico businesses into one International operating segment, which represents the International reportable segment.

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative ("SG&A") expenses.

Cash, Cash Equivalents and Restricted Cash

Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, commercial paper, corporate bonds and time deposits with an original maturity of 3 months or less when purchased. The amounts of cash equivalents at February 1, 2020, and February 2, 2019, were $1,668 million and $1,410 million, respectively, and the weighted-average interest rates were 1.8% and 2.5%, respectively.

Cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets is reconciled to the total shown within our Consolidated Statements of Cash Flows as follows ($ in millions):



	February 1, 2020		February 2, 2019		February 3, 2018
Cash and cash equivalents	$	2,229	$	1,980	$	1,101
Restricted cash included in Other current assets		126		204		199
Total cash, cash equivalents and restricted cash	$	2,355	$	2,184	$	1,300

Amounts included in restricted cash are pledged as collateral or restricted to use for workers' compensation and general liability insurance claims.

Receivables

Receivables consist primarily of amounts due from vendors for various vendor funding programs, banks for customer credit card and debit card transactions and mobile phone network operators for device sales and commissions. We establish allowances for uncollectible receivables based primarily on historical collection trends. Our allowances for uncollectible receivables were $24 million and $23 million at February 1, 2020, and February 2, 2019, respectively. We did not have material write-offs during the periods presented.

Merchandise Inventories

Merchandise inventories are recorded at the lower of cost or net realizable value. The weighted average method is used to determine the cost of inventory which includes costs of in-bound freight to move inventory into our distribution centers. Also included in the cost of inventory are certain vendor allowances. Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of sales.

Our inventory valuation also reflects markdown adjustments for the excess of the cost over the net recovery we expect to realize from the ultimate disposition of inventory and establishes a new cost basis. No adjustment is recorded for inventory that we are able to return to our vendors for full credit. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdown adjustments or an increase in the newly established cost basis.

Our inventory valuation reflects adjustments for physical inventory losses (resulting from, for example, theft). Physical inventory is maintained through a combination of full location counts (typically once per year) and more regular cycle counts.

Property and Equipment

Property and equipment are recorded at cost. We depreciate property and equipment to its residual value using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from the date the assets are placed in service to the end of the lease term, which includes optional renewal periods if they are reasonably certain. Accelerated depreciation methods are generally used for income tax purposes.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our Consolidated Balance Sheets and any resulting gain or loss is reflected on our Consolidated Statements of Earnings.

Repairs and maintenance costs are expensed as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.

Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, generally from two years to seven years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software is included in Fixtures and equipment on our Consolidated Balance Sheets. Software maintenance and training costs are expensed in the period incurred. The costs of developing software for sale to customers is expensed as incurred until technological feasibility is established, which generally leads to expensing substantially all costs.

Estimated useful lives by major asset category are as follows (in years):



Asset Category	Useful Life
Buildings	5-35
Leasehold improvements	2-10
Fixtures and equipment	2-15

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets with impairment indicators for potential impairment, we first compare the carrying value of the asset to its estimated undiscounted future cash flows. If the sum of the estimated undiscounted future cash flows is less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to its estimated fair value, which is typically based on estimated discounted future cash flows. We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value.

We evaluate locations for triggering events on a quarterly basis. For store locations, our primary indicator that asset carrying values may not be recoverable is negative store operating income for the most recent 12-month period. We also monitor other factors when evaluating store locations for impairment, including significant changes in the manner of use or expected life of the assets or significant changes in our business strategies.

When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For example, long-lived assets deployed at store locations are reviewed for impairment at the individual store level, which involves comparing the net carrying value of all assets to the net cash flow projections for each store. In addition, we conduct separate impairment reviews at other levels as appropriate, for example, to evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.

Leases

The majority of our lease obligations are real estate operating leases used in our retail and distribution operations. Our finance leases are primarily equipment-related. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on our Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASC 842, Leases, we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We estimate the incremental borrowing rate for each lease based on an evaluation of our credit ratings and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the terms of the lease. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components. Operating lease assets also include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

Goodwill and Intangible Assets

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We test goodwill for impairment annually in the fiscal fourth quarter or whenever events or circumstances indicate the carrying value may not be recoverable. We monitor the existence of potential impairment indicators throughout the fiscal year. We test for goodwill impairment at the reporting unit level. Reporting units are determined by identifying components of operating segments which constitute businesses for which discrete financial information is available and is regularly reviewed by segment management. No components were aggregated in arriving at our reporting units. We have goodwill in two reporting units – Best Buy Domestic and Best Buy Health – with carrying values of $443 million and $541 million, respectively, as of February 1, 2020.

Our detailed impairment testing involves comparing the fair value of each reporting unit with its carrying value, including goodwill. Fair value reflects the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction and typically requires analysis of discounted cash flows and other market information, such as trading multiples when applicable. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically

valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit's goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Intangible Assets

Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of acquisition, using income and market approaches to determine fair value, as appropriate.

We amortize our definite-lived intangible assets over the estimated useful life of the asset. We do not amortize our indefinite-lived tradename, but test for impairment annually, or when indications of potential impairment exist. We utilize the relief from royalty method to determine the fair value of our indefinite-lived tradename. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess.

Derivatives

Net Investment Hedges

We use foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms of up to 12 months. For a net investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. We report the gains and losses, if any, related to the amount excluded from the assessment of hedge effectiveness in net earnings.

Interest Rate Swaps

We utilized "receive fixed-rate, pay variable-rate" interest rate swaps to mitigate the effect of interest rate fluctuations on our $650 million principal amount of notes due March 15, 2021 (“2021 Notes”) and on our $500 million principal amount of notes due October 1, 2028 (“2028 Notes”). Our interest rate swap contracts are considered perfect hedges because the critical terms and notional amounts match those of our fixed-rate debt being hedged and are, therefore, accounted for as fair value hedges using the shortcut method. Under the shortcut method, we recognize the change in the fair value of the derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Consolidated Statements of Earnings from the fair value of the derivatives.

Derivatives Not Designated as Hedging Instruments

We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly to net earnings.

Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 — Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.

Level 2 — Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

• Quoted prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in non-active markets;

• Inputs other than quoted prices that are observable for the asset or liability; and

• Inputs that are derived principally from or corroborated by other observable market data.

Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value, except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within SG&A and Restructuring charges on our Consolidated Statements of Earnings for non-restructuring and restructuring charges, respectively.

Fair value remeasurements are based on significant unobservable inputs (Level 3). Fixed asset fair values are primarily derived using a discounted cash flow (“DCF”) model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally include our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.

Insurance

We are self-insured for certain losses related to workers' compensation, medical and general liability claims; however, we obtain third-party excess insurance coverage to limit our exposure to certain claims. Some of these self-insured losses are managed through a wholly-owned insurance captive. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported. We utilize valuations provided by qualified, independent third-party actuaries as well as internal insurance and risk expertise. Our self-insured liabilities included in our Consolidated Balance Sheets were as follows ($ in millions):



	February 1, 2020		February 2, 2019
Accrued liabilities	$	75	$	69
Long-term liabilities		46		60
Total	$	121	$	129

Income Taxes

We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

In determining our provision for income taxes, we use an annual effective income tax rate based on annual income, permanent differences between book and tax income and statutory income tax rates. The effective income tax rate also reflects our assessment of the ultimate outcome of tax audits. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events, such as audit settlements or changes in tax laws, are recognized in the period in which they occur.

Our income tax returns are periodically audited by U.S. federal, state and local and foreign tax authorities. At any one time, multiple tax years are subject to audit by the various tax authorities. In evaluating the exposures associated with our various tax filing positions, we may record a liability for such exposures. A number of years may elapse before a particular matter, for which we have established a liability, is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provisions in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. We include our liability for unrecognized tax benefits, including accrued penalties and interest, in Long-term liabilities on our Consolidated Balance Sheets and in Income tax expense on our Consolidated Statements of Earnings.

Accrued Liabilities

The major components of accrued liabilities are sales tax liabilities, advertising accruals, loyalty program liabilities, sales return reserves, customer deposits and insurance liabilities.

Long-Term Liabilities

The major components of long-term liabilities are unrecognized tax benefits, income tax liabilities, self-insurance reserves and deferred taxes.

Foreign Currency

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Consolidated Balance Sheet dates. For operations reported on a one-month lag, we use the exchange rates in effect one month prior to our Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders' equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant in any period presented.

Revenue Recognition

We generate revenue from the sale of products and services, both as a principal and as an agent. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods or services. Our revenue excludes sales and usage-based taxes collected and is reported net of sales refunds, which includes an estimate of future returns and contract cancellations based on historical refund rates, with a corresponding reduction to cost of sales. We defer the revenue associated with any unsatisfied performance obligation until the obligation is satisfied, i.e., when control of a product is transferred to the customer or a service is completed.

Product Revenue

Product revenue is recognized when the customer takes physical control, either in our stores or at their home. Any fees charged to customers for delivery are a component of the transaction price and are recognized when delivery has been completed. We use delivery information at an individual contract level to determine when to recognize revenue for delivered products and any related delivery fee revenue.

In most cases, we are the principal to product contracts as we have control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily activation-based software licenses and third-party stored-value cards, we are the sales agent providing access to the content and recognize commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes upon providing access of the content to the customer.

Warranty obligations associated with the sale of our exclusive brands products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.

Services - When we are the principal

We recognize revenue for services, such as installation, set-up, software troubleshooting, product repair, consultation and educational classes once the service is completed, as this is when the customer has the ability to direct the use of and obtain the benefits of the service or serviced product. Payment terms are typically at the point of sale, but may also occur upon completion of the service. Our service contracts are primarily with retail customers, merchandise vendors (for factory warranty repairs) and third-party underwriters who sell extended warranty protection plans.

For technical support membership contracts (for example, our Total Tech Support offering), we are responsible for fulfilling the support services to customers. These contracts have terms ranging from one month to three years and typically contain several performance obligations. Payment for the membership contracts is due at the start of the contract period. We have determined that our contracts do not include a significant financing component. The primary purpose of our payment terms is to provide customers with a simplified method of purchasing our services, not to provide customers with financing. For performance obligations provided over time, we recognize revenue on a usage basis, an input method of measuring progress over the related contract term. This method is derived by analysis of historical utilization patterns as this depicts when customers use the services and, accordingly, when delivery of the performance obligation occurs. There is judgment in (1) determining the level at which we apply a portfolio approach to these contracts; (2) measuring the relative standalone selling price for performance obligations within these contracts to the extent that they are only bundled and sold to customers with other performance obligations, or alternatively, using a cost-plus margin approach; and, (3) assessing the pattern of delivery across multiple portfolios of customers, including estimating current and future usage patterns. When insufficient history of usage is available, we generally recognize revenue ratably over the life of the contract.

Services - When we are the agent

On behalf of third-party underwriters, we sell various hardware protection plans to customers that provide extended warranty coverage on their device purchases. Such plans have terms ranging from one month to five years. Payment is due at the point of sale. Third-party underwriters assume the risk associated with the coverage and are primarily responsible for fulfillment. We record the net commissions (the amount charged to the customer less the premiums remitted to the underwriter) as revenue at a point in time when the corresponding product revenue is recognized. In addition, in some cases we are eligible to receive profit-sharing payments, a form of variable consideration, which are dependent upon the financial performance of the underwriter’s protection plan portfolio. We do not share in any losses of the portfolio. We record any profit share as revenue once the uncertainty associated with the portfolio period, which is calendar-year based, is no longer constrained using the expected value method. This typically occurs during our fiscal fourth quarter, with payment of the profit share occurring in the subsequent fiscal year. Service and commission revenues earned from the sale of extended warranties represented approximately 2% of revenue in fiscal 2020, fiscal 2019 and fiscal 2018.

We earn commissions from mobile network carriers to sell service contracts on their platforms. Revenue is recognized when control passes at a point in time upon sale of the contract and activation of the customer on the provider’s platform. The time between when we activate the service with the customer and when we receive payment from the content provider is generally within 30 to 60 days, which is after control has passed. Activation commissions are subject to repayment to the carrier primarily in the event of customer cancellation for specified time periods after the sale. Commission revenue from mobile network carriers is reported net of the expected cancellations, which we estimate based on historical cancellation rates.

Credit Card Revenue

We offer promotional financing and credit cards issued by third-party banks that manage and directly extend credit to our customers. Approximately 25% of revenue in fiscal 2020, fiscal 2019 and fiscal 2018 was transacted using one of our branded cards. We provide a license to our brand and marketing services, and we facilitate credit applications in our stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in the financing transactions with customers. We are eligible to receive a profit share from certain of our banking partners based on the annual performance of their corresponding portfolio, and we receive quarterly payments based on forecasts of full-year performance. This is a form of variable consideration. We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each quarter when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically quarterly. Profit-share payments occur quarterly, shortly after the end of each program quarter.

Best Buy Gift Cards

We sell Best Buy gift cards to our customers in our retail stores, online and through select third parties. Our gift cards do not expire. We recognize revenue from gift cards when the card is redeemed by the customer. We also recognize revenue for the portion of gift card values that is not expected to be redeemed ("breakage"). We estimate breakage based on historical patterns and other factors, such as laws and regulations applicable to each jurisdiction. We recognize breakage revenue using a method that is consistent with customer redemption patterns. Typically, over 90% of gift card redemptions (and therefore recognition of over 90% of gift card breakage revenue) occur within one year of issuance. There is judgment in assessing (1) the level at which we group gift cards for analysis of breakage rates, (2) redemption patterns, and (3) the ultimate value of gift cards which we do not expect to be redeemed. Gift card breakage income was $35 million, $34 million and $40 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

Sales Incentives

We frequently offer sales incentives that entitle our customers to receive a gift card at the time of purchase or an instant savings coupon that can be redeemed towards a future purchase. For sales incentives issued to customers that are only earned in conjunction with the purchase of products or services, the sales incentives represent an option that is a material right and, accordingly, is a performance obligation in the contract. The revenue allocated to these sales incentives is deferred as a contract liability and is based on the cards or coupons that are projected to be redeemed. We recognize revenue for this performance obligation when it is redeemed by the customer or when it is not expected to be redeemed. There is judgment in determining (1) the level at which we group incentives based on similar redemption patterns, (2) future redemption patterns, and (3) the ultimate number of incentives that we do not expect to be redeemed.

We also issue coupons that are not earned in conjunction with a purchase of a product or service, typically as part of targeted marketing activities. This is not a performance obligation, but is recognized as a reduction of the transaction price when redeemed by the customer.

Customer Loyalty Programs

We have customer loyalty programs which allow members to earn points for each purchase completed with us or when using our co-branded credit cards. Points earned enable members to receive a certificate that may be redeemed on future purchases. Depending on the customer's membership level within our loyalty program, certificate expirations typically range from 2 to 6 months from the date of issuance. Our loyalty programs represent customer options that provide a material right and, accordingly, are performance obligations for each applicable contract. The relative standalone selling price of points earned by our loyalty program members is deferred and included in Accrued liabilities on our Consolidated Balance Sheets based on the percentage of points that are projected to be redeemed. We recognize revenue for this performance obligation over time when a certificate is estimated to be redeemed by the customer. There is inherent judgment in estimating the value of our customer loyalty programs as they are susceptible to factors outside of our influence, particularly customer redemption activity. However, we have significant experience in estimating the amount and timing of redemptions of certificates, based primarily on historical data.

Cost of Sales and Selling, General and Administrative Expenses

The following table illustrates the primary costs classified in each major expense category.

Cost of Sales

Cost of products sold, including:

Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers

Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs

Cash discounts on payments to merchandise vendors

Physical inventory losses

Markdowns

Customer shipping and handling expenses

Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs and depreciation

Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores

Cost of services provided, including:

Payroll and benefit costs for services employees

Cost of replacement parts and related freight expenses

Selling, General and Administrative Expenses

Payroll and benefit costs for retail and corporate employees

Occupancy and maintenance costs of retail, services and corporate facilities

Depreciation and amortization related to retail, services and corporate assets

Advertising costs

Vendor allowances that are a reimbursement of specific, incremental and identifiable costs

Tender costs, including bank charges and costs associated with credit and debit card interchange fees

Charitable contributions

Outside and outsourced service fees

Long-lived asset impairment charges

Other administrative costs, such as supplies, travel and lodging

Vendor Allowances

We receive funds from certain vendors through a variety of programs and arrangements, primarily in the form of purchases-based or sales-based volumes and for product advertising and placement in our stores. We recognize these funds as a reduction of cost of sales when the associated inventory is sold. If the funds are not specifically related to purchase or sales volumes, the funds are recognized ratably over the performance period as the product promotion is completed. Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell a vendor's products are recorded as an offset to the related expense when incurred.

Advertising Costs

Advertising costs, which are included in SG&A, are expensed over the period in which the advertisement is customer-facing. Advertising costs consist primarily of digital and television advertisements, as well as agency fees and production costs. Advertising expenses were $840 million, $777 million and $776 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

Stock-Based Compensation

We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which requires us to recognize expense for the fair value of our stock-based compensation awards. Compensation expense is recognized over the period in which services are required. It is recognized on a straight-line basis, except where there are performance awards that vest on a graded basis, in which case the expense for these awards is front-loaded or recognized on a graded-attribution basis.

Comprehensive income (loss)

Comprehensive income (loss) is computed as net earnings plus certain other items that are recorded directly to shareholders' equity. In addition to net earnings, the significant component of comprehensive income (loss) includes foreign currency translation adjustments.

Acquisitions

12 Months Ended

Feb. 01, 2020

Acquisitions [Abstract]

Acquisitions

2. Acquisitions

GreatCall, Inc.

On October 1, 2018, we acquired all of the outstanding shares of GreatCall, Inc. (“GreatCall”) for net cash consideration of $787 million. GreatCall, a leading connected health services provider for aging consumers, offers easy-to-use mobile products and connected devices, tailored for seniors. These products are combined with a range of services, including a simple, one-touch connection to U.S.-based, specially-trained agents who can connect the user to family caregivers, provide concierge services and dispatch emergency personnel. The acquisition of GreatCall is aligned with our strategy to address health and wellness with a focus on aging consumers and how technology can help them live more independent lives.

The acquisition was accounted for using the acquisition method of accounting for business combinations. All of the goodwill was assigned to our Best Buy Health reporting unit within our Domestic reportable segment, the majority of which was deductible for income tax purposes. We recorded $13 million of transaction costs in fiscal 2019 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings. Results of operations from the date of acquisition were included within our Best Buy Health operating segment, Domestic reportable segment and our Services revenue category. The acquisition of GreatCall was not material to the results of our operations.

The fair value of assets acquired and liabilities assumed was as follows ($ in millions):


	Fair Value at Acquisition Date		Measurement Period Adjustments		Adjusted ‎Fair Value
Current assets	$	34	$	(2)	$	32
Goodwill		496		(6)		490
Intangible assets⁽¹⁾		371		2		373
Other assets		27		(2)		25
Total assets acquired		928		(8)		920
Accrued liabilities		56		(1)		55
Long-term liabilities		72		(2)		70
Total liabilities assumed		128		(3)		125
Total purchase price⁽²⁾		800		(5)		795
Less cash acquired		8		—		8
Total purchase price, net of cash acquired	$	792	$	(5)	$	787

(1)The adjusted fair value of Intangible assets included consumer customer relationships of $235 million (amortized over 5 years), tradename of $63 million (amortized over 8 years), developed technology of $52 million (amortized over 5 years) and commercial customer relationships of $23 million (amortized over 10 years).

(2)Measurement period adjustments included the finalization of the working capital adjustment.

Critical Signal Technologies, Inc.

On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (“CST”), a health services company, for net cash consideration of $125 million. The acquisition of CST is aligned with our strategy to address health and wellness with a focus on aging seniors and how technology can help them live longer in their homes.

The acquisition was accounted for using the acquisition method of accounting for business combinations. The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to immaterial changes. The acquired assets were primarily comprised of $83 million of customer relationships (amortized over 15 years) recorded within Other assets on our Consolidated Balance Sheets. Goodwill of $52 million was recorded and assigned to our Best Buy Health reporting unit and is not expected to be deductible for income tax purposes. We recorded $3 million of transaction costs in fiscal 2020 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings. Results of operations from the date of acquisition were included within our Best Buy Heath operating segment, Domestic reportable segment and Services revenue category. The acquisition of CST is not material to the results of our operations.

BioSensics, LLC

On August 7, 2019, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”) for net cash consideration of $20 million, primarily comprised of $19 million of goodwill and $4 million of definite-lived technology (amortized over 3 years). Goodwill, which was assigned to our Domestic reporting unit, is deductible for tax purposes. The acquisition currently supports our health strategy and is included in our Domestic operating and reportable segments. The transaction was accounted for as a business combination and is not material to the results of our operations.

Goodwill and Intangible Assets

12 Months Ended

Feb. 01, 2020

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

3. Goodwill and Intangible Assets

Goodwill

Goodwill balances by reportable segment were as follows ($ in millions):



	February 1, 2020				February 2, 2019
	Gross Carrying Amount		Cumulative Impairment		Gross Carrying Amount		Cumulative Impairment
Domestic	$	1,051	$	(67)	$	982	$	(67)
International		608		(608)		608		(608)
Total	$	1,659	$	(675)	$	1,590	$	(675)

No goodwill impairment charges were recorded in fiscal 2020 or fiscal 2019.

Indefinite-Lived Intangible Assets

We have indefinite-lived intangible assets primary related to our Pacific Sales tradename, which are recorded within Other assets on our Consolidated Balance Sheets. The carrying value of indefinite-lived intangible assets was $18 million as of February 1, 2020, and February 2, 2019.

Definite-Lived Intangible Assets

We have definite-lived intangible assets which are recorded within Other assets on our Consolidated Balance Sheets as follows ($ in millions):



	February 1, 2020				February 2, 2019				Weighted-Average
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Life Remaining as of February 1, 2020 (in years)
Customer relationships	$	339	$	70	$	258	$	16		7.1
Tradename		63		10		63		3		6.7
Developed technology		56		15		52		4		3.6
Total	$	458	$	95	$	373	$	23		6.6

Amortization expense was as follows ($ in millions):



	Statement of Earnings Location	2020		2019		2018
Amortization expense	SG&A	$	72	$	23	$	-

Amortization expense expected to be recognized in future periods is as follows ($ in millions):



Fiscal Year		Amount
2021	$	74
2022		74
2023		74
2024		54
2025		16
Thereafter		71

Fair Value Measurements

12 Months Ended

Feb. 01, 2020

Fair Value Measurements [Abstract]

Fair Value Measurements

4. Fair Value Measurements

Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Recurring Fair Value Measurements

Financial assets and liabilities accounted for at fair value were as follows ($ in millions):

Fair Value at

Balance Sheet Location⁽¹⁾

Fair Value Hierarchy

February 1, 2020

February 2, 2019

Assets

Money market funds⁽²⁾

Cash and cash equivalents

Level 1

$

524

$

98

Commercial paper⁽²⁾

Cash and cash equivalents

Level 2

75

-

Time deposits⁽³⁾

Cash and cash equivalents

Level 2

185

300

Money market funds⁽²⁾

Other current assets

Level 1

16

82

Time deposits⁽³⁾

Other current assets

Level 2

101

Foreign currency derivative instruments⁽⁴⁾

Other current assets

Level 2

1

-

Marketable securities that fund deferred compensation⁽⁵⁾

Other assets

Level 1

48

44

Interest rate swap derivative instruments⁽⁴⁾

Other assets

Level 2

89

26

Liabilities

Interest rate swap derivative instruments⁽⁴⁾

Long-term liabilities

Level 2

-

1

(1)Balance sheet location is determined by the length to maturity from the current period-end date.

(2)Valued at quoted market prices.

(3)Valued at face value plus accrued interest, which approximates fair value.

(4)Valued using readily observable market inputs. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market.

(5)Valued using select mutual fund performance that trade with sufficient frequency and volume to obtain pricing information on an ongoing basis.

Fair Value of Financial Instruments

The fair values of cash, receivables, accounts payable and other payables approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair values.

Long-term debt is presented at carrying value on our Consolidated Balance Sheets. If our long-term debt was recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. Long-term debt balances were as follows ($ in millions):



	February 1, 2020				February 2, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt⁽¹⁾	$	1,322	$	1,239	$	1,178	$	1,175

(1)Excludes debt discounts and issuance costs. Also excludes finance lease obligations as of February 1, 2020, and financing and capital lease obligations as of February 2, 2019.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Derivative Instruments

12 Months Ended

Feb. 01, 2020

Derivative Instruments [Abstract]

Derivative Instruments

5. Derivative Instruments

We manage our economic and transaction exposure to certain risks by using foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations, and interest rate swaps to mitigate the effect of interest rate fluctuations on our 2021 Notes and 2028 Notes. In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies.

Our derivative instruments designated as net investment hedges and interest rate swaps are recorded on our Consolidated Balance Sheets at fair value. See Note 4, Fair Value Measurements, for gross fair values of our outstanding derivative instruments and corresponding fair value classifications.

Notional amounts of our derivative instruments were as follows ($ in millions):



	Notional Amount
Contract Type	February 1, 2020		February 2, 2019
Derivatives designated as net investment hedges	$	129	$	15
Derivatives designated as interest rate swap contracts		1,150		1,150
No hedging designation (foreign exchange forward contracts)		31		9
Total	$	1,310	$	1,174

Effects of our derivative instruments on our Consolidated Statements of Earnings were as follows ($ in millions):

.

		Gain (Loss) Recognized
Contract Type	Statement of Earnings Location	2020		2019
Interest rate swap contracts	Interest expense	$	64	$	31
Adjustments to carrying value of long-term debt	Interest expense		(64)		(31)
Total with hedging designation		$	—	$	—

Debt

12 Months Ended

Feb. 01, 2020

Debt [Abstract]

Debt

6. Debt

Short-Term Debt

U.S. Revolving Credit Facility

On April 17, 2018, we entered into a $1.25 billion five year senior unsecured revolving credit facility agreement (the "Facility") with a syndicate of banks. The Facility permits borrowings of up to $1.25 billion and expires in April 2023, with no borrowings outstanding as of February 1, 2020, and February 2, 2019.

The interest rate under the Facility is variable and, barring certain events of default, is determined at our option as: (i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.'s prime rate, (2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5%, and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1%, and (b) a variable margin rate (the “ABR Margin”); or (ii) the LIBOR plus a variable margin rate (the “LIBOR Margin”). In addition, a facility fee is assessed on the commitment amount. The ABR Margin, LIBOR Margin and the facility fee are based upon our current senior unsecured debt rating. Under the Facility, the ABR Margin ranges from 0.00% to 0.30%, the LIBOR Margin ranges from 0.80% to 1.30% and the facility fee ranges from 0.08% to 0.20%.

The Facility is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants. Among other things, these covenants restrict our and certain of our subsidiaries' ability to incur liens on certain assets; make material changes in corporate structure or the nature of our business; dispose of material assets; engage in certain mergers, consolidations and other fundamental changes; or engage in certain transactions with our affiliates. The Facility also contains covenants that require us to maintain a maximum quarterly cash flow leverage ratio and a minimum quarterly interest coverage ratio. The Facility contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants. At February 1, 2020, we were in compliance with all such covenants.

On March 19, 2020, we drew down the full amount of the Facility to increase our cash position and maximize flexibility in light of the uncertainty surrounding the impact of COVID-19. The interest rate for this draw under the Facility is variable at the 7-day LIBOR plus a variable margin rate of 1.015%. The proceeds and resulting liability from the Facility will be included in Cash and cash equivalents and Short-term debt, respectively, on our Consolidated Balance Sheets.

Long-Term Debt

Long-term debt consisted of the following ($ in millions):



	February 1, 2020		February 2, 2019
2021 Notes	$	650	$	650
2028 Notes		500		500
Interest rate swap valuation adjustments		89		25
Subtotal		1,239		1,175
Debt discounts and issuance costs		(6)		(7)
Financing lease obligations⁽¹⁾		-		181
Capital lease obligations ⁽¹⁾		-		39
Finance lease obligations⁽¹⁾		38		-
Total long-term debt		1,271		1,388
Less current portion		14		56
Total long-term debt, less current portion	$	1,257	$	1,332

(1)See Note 10, Leases, for additional information regarding our lease obligations.

2021 Notes

In March 2011, we issued $650 million principal amount of notes due March 15, 2021 (the “2021 Notes”). The 2021 Notes bear interest at a fixed rate of 5.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2011. The 2021 Notes were issued at a slight discount to par, which when coupled with underwriting discounts of $4 million, resulted in net proceeds from the sale of the 2021 Notes of $644 million.

We may redeem some or all of the 2021 Notes at any time at a redemption price equal to the greater of (i) 100% of the principal amount, and (ii) the sum of the present values of each remaining scheduled payment of principal and interest discounted to the redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount to the redemption date as described in the indenture (including the supplemental indenture) relating to the 2021 Notes. Furthermore, if a change of control triggering event occurs, we will be required to offer to purchase the remaining unredeemed 2021 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the purchase date.

The 2021 Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The 2021 Notes contain covenants that, among other things, limit our ability to incur debt secured by liens or to enter into sale and lease-back transactions.

2028 Notes

In September 2018, we issued $500 million principal amount of notes due October 1, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a fixed rate of 4.45% per year, payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2019. Net proceeds from the issuance were $495 million after underwriting and issuance discounts totaling $5 million.

We may redeem some or all of the 2028 Notes at any time at a redemption price equal to the greater of (i) 100% of the principal amount, and (ii) the sum of the present values of each remaining scheduled payment of principal and interest discounted to the redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount to the redemption date as described in the indenture (including the supplemental indenture) relating to the 2028 Notes. Furthermore, if a change of control triggering event occurs, we will be required to offer to purchase the remaining unredeemed 2028 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the purchase date.

The 2028 Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The 2028 Notes contain covenants that, among other things, limit our ability to incur debt secured by liens or to enter into sale and lease-back transactions.

Fair Value and Future Maturities

See Note 4, Fair Value Measurements, for the fair value of long-term debt.

At February 1, 2020, the future maturities of long-term debt, net of interest rate swaps and excluding debt discounts, issuance costs and lease obligations (see Note 10, Leases, for future lease payments), consisted of the following ($ in millions):



Fiscal Year	Amount
2021	$	-
2022		664
2023		-
2024		-
2025		-
Thereafter		575
Total long-term debt	$	1,239

Shareholders' Equity

12 Months Ended

Feb. 01, 2020

Shareholders' Equity [Abstract]

Shareholders' Equity

7. Shareholders' Equity

Stock Compensation Plans

Our Best Buy Co., Inc. Amended and Restated 2014 Omnibus Incentive Plan (the "Omnibus Plan") authorizes us to grant or issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards up to a total of 22.5 million shares. We have not granted incentive stock options under the Omnibus Plan. Under the terms of the Omnibus Plan, awards may be granted to our employees, officers, advisers, consultants and directors. Awards issued under the Omnibus Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors at the time of grant. Awards granted, forfeited or canceled under the previous plan, the 2004 Omnibus Stock and Incentive Plan, after February 1, 2014, adjust the amount available under the Omnibus Plan. At February 1, 2020, a total of 9.4 million shares were available for future grants under the Omnibus Plan.

Upon adoption and approval of the Omnibus Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continued to vest in accordance with the original vesting schedule and will expire at the end of their original terms.

Our outstanding stock options have a 10-year term. Outstanding stock options issued to employees generally vest over a three year period. Share awards vest based either upon attainment of specified goals or solely upon continued employment ("time-based"). Outstanding share awards that are not time-based vest at the end of a three-year incentive period based upon our total shareholder return ("TSR") compared to the TSR of companies that comprise Standard & Poor's 500 Index ("market-based") or upon the achievement of company performance goals ("performance-based"). Generally, time-based share awards vest 33% on each of the three annual anniversary dates following the grant date. Time-based share awards to directors vest one year from the grant date.

Stock-based compensation expense was as follows ($ in millions):



	2020		2019		2018
Stock options	$	7	$	3	$	6
Share awards:
Market-based		13		15		19
Performance-based		28		20		13
Time-based		95		85		91
Total	$	143	$	123	$	129

Stock Options

Stock option activity was as follows:



	Stock Options	Weighted-Average ‎Exercise Price per Share		Weighted-Average ‎Remaining Contractual Term (in years)		Aggregate ‎Intrinsic Value ‎(in millions)
Outstanding at February 2, 2019	2,358	$	33.47
Granted	719	$	69.17
Exercised	(1,461)	$	27.92
Outstanding at February 1, 2020	1,616	$	54.38		6.9	$	49
Vested or expected to vest at February 1, 2020	1,616	$	54.38		6.9	$	49
Exercisable at February 1, 2020	712	$	38.29		4.3	$	33

The weighted-average grant-date fair value of stock options granted during fiscal 2020, fiscal 2019 and fiscal 2018 was $19.81, $20.34 and $12.52, respectively, per share. The aggregate intrinsic value of our stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during fiscal 2020, fiscal 2019 and fiscal 2018, was $59 million, $33 million and $57 million, respectively. At February 1, 2020, there was $10 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 2.9 years.

Net cash proceeds from the exercise of stock options were $40 million, $30 million and $156 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

There was $14 million, $7 million and $19 million of income tax benefits realized from stock option exercises in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

We estimated the fair value of each stock option on the date of grant using a lattice valuation model with the following assumptions:



Valuation Assumptions	2020					2019					2018
Risk-free interest rate⁽¹⁾	1.9	%	-	2.5	%	1.9	%	-	2.8	%	0.9	%	-	2.6	%
Expected dividend yield	2.9				%	2.7				%	3.0				%
Expected stock price volatility⁽²⁾	36				%	39				%	38				%
Expected life of stock options (in years)⁽³⁾	7.4					6.5					6.0

(1)Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options

(2)In projecting expected stock price volatility, we consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.

(3)We estimate the expected life of stock options based upon historical experience.

Market-Based Share Awards

The fair value of market-based share awards is determined using Monte-Carlo simulation. A summary of the status of our non-vested market-based share awards was as follows (shares in millions):



Market-Based Share Awards	Shares	Weighted-Average Fair Value per Share
Outstanding at February 2, 2019	1,187	$	40.07
Granted	584	$	72.90
Vested	(1,025)	$	29.90
Forfeited/canceled	(54)	$	58.96
Outstanding at February 1, 2020	692	$	59.84

At February 1, 2020, there was $15 million of unrecognized compensation expense related to non-vested market-based share awards that we expect to recognize over a weighted-average period of 1.8 years.

Time-Based Share Awards

The fair value of time-based share awards is determined based on the closing market price of our stock on the date of grant. This value is reduced by the present value of expected dividends during vesting when the employee is not entitled to dividends.

A summary of the status of our non-vested time-based share awards was as follows (shares in millions):



Time-Based Share Awards	Shares	Weighted-Average Fair Value per Share
Outstanding at February 2, 2019	4,098	$	47.13
Granted	1,880	$	68.80
Vested	(1,868)	$	45.01
Forfeited/canceled	(258)	$	62.23
Outstanding at February 1, 2020	3,852	$	57.81

At February 1, 2020, there was $116 million of unrecognized compensation expense related to non-vested time-based share awards that we expect to recognize over a weighted-average period of 1.8 years.

Performance-Based Share Awards

The fair value of performance-based share awards is determined based on the closing market price of our stock on the date of grant. This value is reduced by the present value of expected dividends during vesting when the employee is not entitled to dividends.

A summary of the status of our non-vested performance-based share awards was as follows (shares in millions):



Performance-Based Share Awards	Shares	Weighted-Average Fair Value per Share
Outstanding at February 2, 2019	819	$	52.78
Granted	516	$	68.90
Vested	(274)	$	42.08
Forfeited/canceled	(108)	$	59.80
Outstanding at February 1, 2020	953	$	63.82

At February 1, 2020, there was $30 million of unrecognized compensation expense related to non-vested performance-based share awards that we expect to recognize over a weighted-average period of 1.8 years.

Earnings per Share

We compute our basic earnings per share based on the weighted-average number of common shares outstanding, and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares

that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive securities include stock options and non-vested share awards. Non-vested market-based share awards and non-vested performance-based share awards are included in the average diluted shares outstanding each period if established market or performance criteria have been met at the end of the respective periods.

At February 1, 2020, options to purchase common stock were all in the money and outstanding as follows (shares in millions):



	Exercisable					Unexercisable					Total
	Shares	%		Weighted- ‎Average Price ‎per Share		Shares	%		Weighted- ‎Average Price ‎per Share		Shares	%		Weighted- ‎Average Price ‎per Share
In-the-money	0.7	100	%	$	38.29	0.9	100	%	$	67.04	1.6	100	%	$	54.38

Reconciliations of the numerators and denominators of basic and diluted earnings per share from continuing operations were as follows ($ and shares in millions, except per share amounts):



	2020		2019		2018
Numerator
Net earnings from continuing operations	$	1,541	$	1,464	$	999
Denominator
Weighted-average common shares outstanding		264.9		276.4		300.4
Effect of potentially dilutive securities:
Stock options and other		3.2		5.0		6.7
Weighted-average common shares outstanding, assuming dilution		268.1		281.4		307.1
Anti-dilutive securities excluded from Weighted-average common shares outstanding, assuming dilution		0.8		0.2		-
Net earnings per share from continuing operations
Basic	$	5.82	$	5.30	$	3.33
Diluted	$	5.75	$	5.20	$	3.26

Repurchase of Common Stock

On February 23, 2019, our Board of Directors authorized a $3.0 billion share repurchase program. There is no expiration date governing the period over which we can repurchase shares under this authorization.

Information regarding the shares we repurchased and retired was as follows ($ and shares in millions, except per share amounts):



	2020		2019		2018
Total cost of shares repurchased	$	1,009	$	1,493	$	2,009
Average price per share	$	72.34	$	70.28	$	57.16
Number of shares repurchased and retired		14.0		21.2		35.1

Between the end of fiscal 2020 on February 1, 2020, and March 18, 2020, we repurchased an incremental 0.6 million shares of our common stock at a cost of $56 million. We have since temporarily suspended all share repurchases. Repurchased shares have been retired and constitute authorized but unissued shares.

Revenue

12 Months Ended

Feb. 01, 2020

Revenue [Abstract]

Revenue

8. Revenue

We generate all of our revenue from contracts with customers from the sale of products and services. Contract balances primarily consist of receivables and contract liabilities related to product merchandise not yet delivered to customers, unredeemed gift cards, services not yet completed, and options that provide a material right to customers, such as our customer loyalty programs. Contract balances were as follows ($ in millions):



	February 1, 2020		February 2, 2019
Receivables⁽¹⁾	$	567	$	565
Short-term contract liabilities included in:
Unredeemed gift cards		281		290
Deferred revenue		501		446
Accrued liabilities		139		146
Long-term contract liabilities included in:
Long-term liabilities		9		11

(1)Receivables are recorded net of allowances for doubtful accounts of $14 million and $13 million as of February 1, 2020, and February 2, 2019, respectively.

During fiscal 2020 and fiscal 2019, $890 million and $871 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

See Note 14, Segment and Geographic Information, for information on our revenue by reportable segment and product category.

Restructuring

12 Months Ended

Feb. 01, 2020

Restructuring [Abstract]

Restructuring

9. Restructuring

Restructuring charges were as follows ($ in millions):



	2020		2019		2018
U.S. Retail Operating Model	$	41	$	-	$	-
Best Buy Mobile		-		47		9
Other		-		(1)		1
Total	$	41	$	46	$	10

U.S. Retail Operating Model

In the second quarter of fiscal 2020, we made changes primarily related to our U.S. retail operating model to increase organization effectiveness and create a more seamless customer experience across all channels. All charges incurred, including $10 million related to a voluntary early retirement offer, related to termination benefits from continuing operations within our Domestic segment.

Restructuring accrual activity related to this plan was as follows ($ in millions):


	Termination Benefits
Balance at February 2, 2019	$	-
Charges		48
Cash payments		(25)
Adjustments⁽¹⁾		(7)
Balance at February 1, 2020	$	16

(1)Adjustments are related to higher-than-expected employee retention, and therefore lower severance expense.

Best Buy Mobile

On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S. This decision was a result of changing economics in the mobile industry since we began opening these stores in 2006, along with the integration of our mobile model into our core stores and on-line channel, which are more economically compelling today. All charges incurred were from continuing operations within our Domestic segment. No restructuring accrual related to this plan remains as of February 1, 2020.

Restructuring charges related to this plan were as follows ($ in millions):



	2019		2018		Cumulative Amount
Property and equipment impairments	$	-	$	1	$	1
Termination benefits		(2)		8		6
Facility closure and other costs		49		-		49
Total	$	47	$	9	$	56

Restructuring accrual activity related to this plan was as follows ($ in millions):



	Termination ‎Benefits		Facility ‎Closure and ‎Other Costs		Total
Balances at February 3, 2018	$	8	$	-	$	8
Charges		1		49		50
Cash payments		(6)		(48)		(54)
Adjustments⁽¹⁾		(3)		-		(3)
Balances at February 2, 2019	$	-	$	1	$	1

(1)Adjustments represent changes in retention assumptions.

Other

Other restructuring charges primarily relate to our Canadian brand consolidation initiated in fiscal 2016 and Renew Blue initiated in fiscal 2013. We may continue to incur immaterial adjustments for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated.

Leases

12 Months Ended

Feb. 01, 2020

Leases [Abstract]

Leases

10. Leases

In the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases. See Note 1, Summary of Significant Accounting Policies, for information regarding our adoption and accounting policy for leases.

Supplemental balance sheet information related to our leases was as follows ($ in millions):



	Balance Sheet Location	February 1, 2020
Assets
Operating leases	Operating lease assets	$	2,709
Finance leases	Property under finance leases, net⁽¹⁾		35
Total lease assets		$	2,744
Liabilities
Current:
Operating leases	Current portion of operating lease liabilities	$	660
Finance leases	Current portion of long-term debt		14
Non-current:
Operating leases	Long-term operating lease liabilities		2,138
Finance leases	Long-term debt		24
Total lease liabilities		$	2,836

(1)Finance leases are recorded net of accumulated depreciation of $54 million.

Components of our total lease cost were as follows ($ in millions):



	Statement of Earnings Location	2020
Operating lease cost⁽¹⁾	Cost of sales and SG&A⁽²⁾	$	780
Finance lease cost:
Depreciation of lease assets	Cost of sales and SG&A⁽²⁾		13
Interest on lease liabilities	Interest expense		2
Variable lease cost	Cost of sales and SG&A⁽²⁾		265
Sublease income	SG&A		(16)
Total lease cost		$	1,044

(1)Includes short-term leases, which are immaterial.

(2)Supply chain-related amounts are included in Cost of sales.

Other information related to our leases was as follows ($ in millions):



	2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	810
Operating cash flows from finance leases		2
Financing cash flows from finance leases		15
Lease assets obtained in exchange for new lease liabilities:
Operating leases		676
Finance leases		10
Weighted average remaining lease term (in years):
Operating leases		5.3
Finance leases		5.0
Weighted average discount rate:
Operating leases		3.3	%
Finance leases		4.2	%

Future lease payments under our non-cancellable leases as of February 1, 2020, were as follows ($ in millions):

.

	Operating Leases⁽¹⁾		Finance Leases⁽¹⁾
Fiscal 2021	$	738	$	15
Fiscal 2022		678		11
Fiscal 2023		521		7
Fiscal 2024		388		3
Fiscal 2025		279		2
Thereafter		456		5
Total future undiscounted lease payments		3,060		43
Less imputed interest		262		5
Total reported lease liability	$	2,798	$	38

(1)Lease payments exclude $158 million of legally binding fixed costs for leases signed but not yet commenced.

In accordance with the prior guidance, ASC 840, Leases, our leases were previously designated as either capital, financing or operating. Previously designated capital leases are now considered finance leases under the new guidance, ASC 842, Leases, while our previously existing financing leases have been derecognized and reclassified as operating leases. The designation of operating leases remains substantially unchanged under the new guidance. The future minimum lease payments by fiscal year as determined prior to the adoption of ASC 842, Leases, under our previously designated capital, financing and operating leases (not including contingent rent) as disclosed in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, were as follows ($ in millions):



	Capital Leases		Financing Leases		Operating Leases⁽¹⁾
Fiscal 2020	$	14	$	48	$	700
Fiscal 2021		11		42		648
Fiscal 2022		7		35		513
Fiscal 2023		4		24		371
Fiscal 2024		2		16		253
Thereafter		7		40		476
Total minimum lease payments		45		205	$	2,961
Less amount representing interest		(6)		(24)
Present value of minimum lease payments		39		181
Less current maturities		(12)		(43)
Present value of minimum lease maturities, less current maturities	$	27	$	138

(1)Operating lease obligations do not include payments to landlords covering real estate taxes and common area maintenance. These charges, if included, would increase total operating lease obligations by $0.8 billion at February 2, 2019.

Income Taxes

12 Months Ended

Feb. 01, 2020

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

Reconciliations of the federal statutory income tax rate to income tax expense were as follows ($ in millions):



	2020			2019			2018
Federal income tax at the statutory rate	$	419		$	396		$	613
State income taxes, net of federal benefit		62			58			44
Benefit from foreign operations		(2)			-			(85)
Other		(27)			(7)			(37)
Tax Act		-			(23)			283
Income tax expense	$	452		$	424		$	818
Effective income tax rate		22.7	%		22.4	%		45.0	%

Tax Reform

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”), which significantly changed U.S. tax law. Among other things, the Tax Act lowered the U.S. statutory tax rate from 35% to 21% effective January 1, 2018, broadened the base to which U.S. income tax applies, imposed a one-time deemed repatriation tax on net unremitted earnings of foreign subsidiaries not previously subject to U.S. income tax and changed how foreign earnings are subject to U.S. income tax.

In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provided guidance on accounting for the impact of the Tax Act. SAB 118 allowed companies to record provisional amounts to the extent they were reasonably estimable and adjust them over time as more information became available, not to extend beyond the measurement period of one year from the enactment of the Tax Act.

As a result of the Tax Act, our blended U.S. statutory federal income tax rate was 33.7% for fiscal 2018. In addition, we recorded provisional tax expense in fiscal 2018 of $283 million. The $283 million included a $209 million charge associated with the deemed repatriation tax and a $74 million charge related to the revaluation of deferred tax assets and liabilities to reflect the new 21.0% tax rate.

In accordance with SAB 118, we completed the accounting for the income tax effects of the Tax Act and recorded the following adjustments to the provisional tax expense during fiscal 2019: (1) a $20 million reduction to the deemed repatriation tax liability, resulting in a final tax liability of $189 million, and (2) a $3 million reduction to the revaluation of deferred tax assets and liabilities to reflect the new tax rate, resulting in a net revaluation charge of $71 million.

Earnings from continuing operations before income tax expense by jurisdiction were as follows ($ in millions):



	2020		2019		2018
United States	$	1,704	$	1,574	$	1,480
Foreign		289		314		337
Earnings from continuing operations before income tax expense	$	1,993	$	1,888	$	1,817

Income tax expense was comprised of the following ($ in millions):



	2020		2019		2018
Current:
Federal	$	261	$	275	$	547
State		73		75		59
Foreign		48		64		50
		382		414		656
Deferred:
Federal		56		4		141
State		8		-		11
Foreign		6		6		10
		70		10		162
Income tax expense	$	452	$	424	$	818

Deferred taxes are the result of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities were comprised of the following ($ in millions):



	February 1, 2020		February 2, 2019
Deferred revenue	$	57	$	52
Compensation and benefits		57		74
Stock-based compensation		34		35
Other accrued expenses		37		40
Accrued property expenses		13		46
Operating lease liabilities		734		-
Loss and credit carryforwards		127		134
Other		46		38
Total deferred tax assets		1,105		419
Valuation allowance		(96)		(91)
Total deferred tax assets after valuation allowance		1,009		328
Inventory		(40)		(61)
Property and equipment		(237)		(184)
Operating lease assets		(692)		-
Goodwill and intangibles		(45)		(12)
Other		(15)		(16)
Total deferred tax liabilities		(1,029)		(273)
Net deferred tax assets (liabilities)	$	(20)	$	55

Deferred taxes were presented as follows ($ in millions):



Balance Sheet Location	February 1, 2020		February 2, 2019
Other assets	$	9	$	55
Long-term liabilities		(29)		-
Net deferred tax assets (liabilities)	$	(20)	$	55

At February 1, 2020, we had deferred tax assets for net operating loss carryforwards from international operations of $78 million, of which $73 million will expire in various years through 2037 and the remaining amounts have no expiration; acquired U.S. federal net operating loss carryforwards of $15 million, of which $11 million will expire in various years between 2023 and 2037 and the remaining amounts have no expiration; U.S. federal foreign tax credit carryforwards of $6 million, which expire between 2024 and 2030; U.S. federal capital loss carryforwards of $4 million, which expire between 2023 and 2025; state credit carryforwards of $8 million, which expire between 2022 and 2039; state net operating loss carryforwards of $6 million, which expire between 2021 and 2039; international credit carryforwards of $2 million, which have no expiration; and international capital loss carryforwards of $8 million, which have no expiration.

At February 1, 2020, a valuation allowance of $96 million had been established, of which $5 million is against U.S. federal foreign tax credit carryforwards; $8 million is against international capital loss carryforwards; $78 million is against international and state net operating loss carryforwards; $1 million is against international credit carryforwards; and $4 million is against other state deferred tax assets. The $5 million increase from February 2, 2019, is primarily due to the current year loss activity from international net operating loss carryforwards, as well as the acquired state net operating loss carryforwards, partially offset by the expiration of certain international net operating loss carryforwards.

Reconciliations of changes in unrecognized tax benefits were as follows ($ in millions):



	2020		2019		2018
Balances at beginning of period	$	300	$	279	$	374
Gross increases related to prior period tax positions		1		4		19
Gross decreases related to prior period tax positions		(5)		(12)		(126)
Gross increases related to current period tax positions		34		36		29
Settlements with taxing authorities		-		(1)		(12)
Lapse of statute of limitations		(12)		(6)		(5)
Balances at end of period	$	318	$	300	$	279

Unrecognized tax benefits of $300 million, $282 million and $263 million at February 1, 2020, February 2, 2019, and February 3, 2018, respectively, would favorably impact our effective income tax rate if recognized.

We recognize interest and penalties (not included in the "unrecognized tax benefits" above), as well as interest received from favorable tax settlements, as components of income tax expense. Interest expense of $11 million, interest expense of $10 million and interest income of $10 million was recognized in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. At February 1, 2020, February 2, 2019, and February 3, 2018, we had accrued interest of $67 million, $53 million and $42 million, respectively.

We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2011.

Changes in state, federal, and foreign tax laws may increase or decrease our tax contingencies. The timing of the resolution of income tax examinations and controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or reach resolutions of income tax examinations or controversies in one or more jurisdictions. These assessments, resolutions, or law changes could result in changes to our gross unrecognized tax benefits. The actual amount of any changes could vary significantly depending on the ultimate timing and nature of any assessments, resolutions or law changes. An estimate of the amount or range of such changes cannot be made at this time.

Benefit Plans

12 Months Ended

Feb. 01, 2020

Benefit Plans [Abstract]

Benefit Plans

12. Benefit Plans

We sponsor retirement savings plans for employees meeting certain eligibility requirements. Participants may choose from various investment options, including a fund comprised of our company stock. Participants can contribute up to 50% of their eligible compensation annually as defined by the plan document, subject to Internal Revenue Service limitations. We match 100% of the first 3% of participating employees' contributions and 50% of the next 2%. Employer contributions vest immediately. The total employer contributions were $73 million, $67 million and $62 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

We offer a non-qualified, unfunded deferred compensation plan for highly-compensated employees and members of our Board of Directors. Amounts contributed and deferred under the plan are invested in options offered under the plan and elected by the participants. The liability for compensation deferred under the plan was $22 million and $23 million at February 1, 2020, and February 2, 2019, respectively, and is included in Long-term liabilities on our Consolidated Balance Sheets. See Note 4, Fair Value Measurements, for the fair value of assets held for deferred compensation.

Contingencies and Commitments

12 Months Ended

Feb. 01, 2020

Contingencies and Commitments [Abstract]

Contingencies and Commitments

13. Contingencies and Commitments

We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected on our Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Consolidated Financial Statements.

We had outstanding letters of credit with an aggregate fair value of $81 million at February 1, 2020.

Segment and Geographic Information

12 Months Ended

Feb. 01, 2020

Segment and Geographic Information [Abstract]

Segment and Geographic Information

14. Segment and Geographic Information

Segment and product category revenue information was as follows ($ in millions):



	2020		2019		2018
Revenue by reportable segment
Domestic	$	40,114	$	39,304	$	38,662
International		3,524		3,575		3,489
Total revenue	$	43,638	$	42,879	$	42,151

	2020		2019		2018
Revenue by product category
Domestic
Computing and Mobile Phones	$	17,819	$	17,439	$	17,386
Consumer Electronics		13,129		12,959		12,841
Appliances		4,493		4,020		3,717
Entertainment		2,388		2,952		2,905
Services		2,126		1,783		1,674
Other		159		151		139
Total Domestic revenue	$	40,114	$	39,304	$	38,662
International
Computing and Mobile Phones	$	1,580	$	1,625	$	1,612
Consumer Electronics		1,163		1,103		1,102
Appliances		317		324		273
Entertainment		209		258		254
Services		199		184		174
Other		56		81		74
Total International revenue	$	3,524	$	3,575	$	3,489

Segment operating income and asset information was as follows ($ in millions):



	2020		2019		2018
Operating income by reportable segment
Domestic⁽¹⁾	$	1,907	$	1,797	$	1,752
International		102		103		91
Total operating income		2,009		1,900		1,843
Other income (expense):
Gain on sale of investments		1		12		1
Investment income and other		47		49		48
Interest expense		(64)		(73)		(75)
Earnings before income tax expense	$	1,993	$	1,888	$	1,817
Assets
Domestic	$	14,247	$	11,908	$	11,553
International		1,344		993		1,496
Total assets	$	15,591	$	12,901	$	13,049
Capital expenditures
Domestic	$	691	$	770	$	606
International		52		49		82
Total capital expenditures	$	743	$	819	$	688
Depreciation
Domestic	$	681	$	687	$	631
International		59		60		52
Total depreciation	$	740	$	747	$	683

(1)The Domestic segment operating income includes certain operations that are based in foreign tax jurisdictions and primarily relate to souring products into the U.S.

Geographic Information

Geographic information was as follows ($ in millions):



	2020		2019		2018
Revenue from external customers
United States	$	40,114	$	39,304	$	38,662
Canada		3,125		3,214		3,187
Other		399		361		302
Total revenue from external customers	$	43,638	$	42,879	$	42,151
Property and equipment, net
United States	$	2,150	$	2,321	$	2,205
Canada		140		161		190
Other		38		28		26
Total property and equipment, net	$	2,328	$	2,510	$	2,421

Quarterly Financial Information

12 Months Ended

Feb. 01, 2020

Quarterly Financial Information [Abstract]

Quarterly Financial Information

15. Quarterly Financial Information (Unaudited)

Unaudited quarterly results were as follows ($ in millions, except per share amounts):



	Quarter
	1st		2nd		3rd		4th		Fiscal Year
Fiscal 2020
Revenue	$	9,142	$	9,536	$	9,764	$	15,196	$	43,638
Gross profit	$	2,169	$	2,283	$	2,361	$	3,235	$	10,048
Operating income	$	334	$	313	$	395	$	967	$	2,009
Net earnings	$	265	$	238	$	293	$	745	$	1,541
Basic earnings per share⁽¹⁾	$	0.99	$	0.89	$	1.11	$	2.87	$	5.82
Diluted earnings per share⁽¹⁾	$	0.98	$	0.89	$	1.10	$	2.84	$	5.75

	Quarter
	1st		2nd		3rd		4th		Fiscal Year
Fiscal 2019
Revenue	$	9,109	$	9,379	$	9,590	$	14,801	$	42,879
Gross profit	$	2,125	$	2,229	$	2,324	$	3,283	$	9,961
Operating income	$	265	$	335	$	322	$	978	$	1,900
Net earnings	$	208	$	244	$	277	$	735	$	1,464
Basic earnings per share⁽¹⁾	$	0.74	$	0.88	$	1.01	$	2.73	$	5.30
Diluted earnings per share⁽¹⁾	$	0.72	$	0.86	$	0.99	$	2.69	$	5.20

(1)The sum of our quarterly diluted earnings per share does not equal our annual diluted earnings per share due to differences in quarterly and annual weighted-average shares outstanding.

Subsequent Events

12 Months Ended

Feb. 01, 2020

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic, and we expect our operations in all locations to be affected as the virus continues to proliferate. We have adjusted certain aspects of our operations to protect our employees and customers while still meeting customers’ needs for vital technology. We will continue to monitor the situation closely and it is possible that we will implement further measures. In light of the uncertainty as to the severity and duration of the pandemic, the impact on our revenues, profitability and financial position is uncertain at this time.

On March 19, 2020, we drew down the full amount of the Facility to increase our cash position and maximize flexibility in light of the uncertainty surrounding the impact of COVID-19. See Note 6, Debt, for additional information. We also temporarily suspended all share repurchases.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Feb. 01, 2020

Summary of Significant Accounting Policies [Abstract]

Description of Business

Our purpose is to enrich the lives of consumers through technology. We have two reportable segments: Domestic and International. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S. under various brand names including Best Buy, Best Buy Business, Best Buy Express, Best Buy Health, CST, Geek Squad, GreatCall, Lively, Magnolia and Pacific Kitchen and Home and the domain names bestbuy.com and greatcall.com. The International segment is comprised of all operations in Canada and Mexico under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and the domain names bestbuy.ca and bestbuy.com.mx.

On October 1, 2018, we acquired all of the outstanding shares of GreatCall, Inc. (“GreatCall”). On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (“CST”), and on August 7, 2019, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”). Refer to Note 2, Acquisitions, for additional information.

Basis of Presentation

The consolidated financial statements include the accounts of Best Buy Co., Inc. and its consolidated subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements. No significant intervening event occurred in these operations that would have materially affected our financial condition, results of operations, liquidity or other factors had it been recorded during fiscal 2020, fiscal 2019 or fiscal 2018.

Discontinued Operations

Discontinued operations in fiscal 2018 reflects the proceeds attributed to a non-compete clause from the sale of Best Buy Europe to Carphone Warehouse plc.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the consolidated financial statements, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Fiscal Year

Our fiscal year ends on the Saturday nearest the end of January. Fiscal 2020 and fiscal 2019 included 52 weeks and fiscal 2018 included 53 weeks, with the additional week occurring in the fourth quarter.

Unadopted & Adopted Accounting Pronouncements

Unadopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of operating lease assets and lease liabilities on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted ASU 2016-02 using the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption were as originally reported under the previous standard – ASC 840, Leases. The effects of adopting the new standard (ASC 842, Leases) in fiscal 2020 were recognized as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal first quarter. We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification as operating or capital leases. We also elected to combine lease and non-lease components and to exclude short-term leases from our Consolidated Balance Sheets. We did not elect the hindsight practical expedient in determining the lease term for existing leases as of February 3, 2019.

The most significant impact of adoption was the recognition of operating lease assets and operating lease liabilities of $2.7 billion and $2.8 billion, respectively, while our accounting for existing capital leases (now referred to as finance leases) remained substantially unchanged. The cumulative impact of these changes decreased retained earnings by $22 million, which included a $3 million net-of-tax adjustment made during the second quarter of fiscal 2020 related to on-adoption impairment charges. We expect the impact of adoption to be immaterial to our consolidated statements of earnings and consolidated statements of cash flows on an ongoing basis. As part of our adoption, we also modified our control procedures and processes, none of which materially affected our internal control over financial reporting. See Note 10, Leases, for additional lease disclosures.

The cumulative effect of the changes made to our Consolidated Balance Sheets for the adoption of this standard was as follows ($ in millions):

				.

	February 2, 2019 ‎As Reported		ASU 2016-02 Adjustment on February 3, 2019			February 3, 2019 ‎As Reported
Assets
Other current assets	$	466	$	(65)	^(a)	$	401
Net property and equipment		2,510		(173)	^(b)		2,337
Operating lease assets		-		2,732	^(c)		2,732
Other assets		606		5	^(d)		611
Liabilities
Accrued liabilities		982		(28)	^(e)		954
Current portion of operating lease liabilities		-		712	^(f)		712
Current portion of long-term debt		56		(43)	^(b)		13
Long-term liabilities		750		(115)	^(e)		635
Long-term operating lease liabilities		-		2,135	^(f)		2,135
Long-term debt		1,332		(140)	^(b)		1,192
Equity
Retained earnings		2,985		(22)	^(g)		2,963

(a)Represents the reclassification of prepaid rent and leasehold acquisition costs to Operating lease assets.

(b)Represents the derecognition of financing obligations and reclassification to Operating lease assets.

(c)Represents the capitalization of operating lease assets and the reclassification of prepaid rent and leasehold acquisition costs, offset by the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves.

(d)Represents the deferred tax impact of the on-adoption adjustments.

(e)Represents the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves to Operating lease assets.

(f)Represents the recognition of Operating lease liabilities.

(g)Represents the net-of-tax retained earnings impact of impairment charges and the derecognition of financing obligations.

Segment Information

Our business is organized into two reportable segments: Domestic (which is comprised of all states, districts and territories of the U.S.) and International (which is comprised of all operations in Canada and Mexico). Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our CODM has ultimate responsibility for enterprise decisions, including determining resource allocation for, and monitoring the performance of, the consolidated enterprise, the Domestic reportable segment and the International reportable segment.

Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and reportable segment results to the operating income level. We aggregate our Best Buy Domestic and Best Buy Health operating segments into one Domestic reportable segment. We also aggregate our Canada and Mexico businesses into one International operating segment, which represents the International reportable segment.

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative ("SG&A") expenses.

Cash, Cash Equivalents and Restricted Cash

Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, commercial paper, corporate bonds and time deposits with an original maturity of 3 months or less when purchased. The amounts of cash equivalents at February 1, 2020, and February 2, 2019, were $1,668 million and $1,410 million, respectively, and the weighted-average interest rates were 1.8% and 2.5%, respectively.

Cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets is reconciled to the total shown within our Consolidated Statements of Cash Flows as follows ($ in millions):



	February 1, 2020		February 2, 2019		February 3, 2018
Cash and cash equivalents	$	2,229	$	1,980	$	1,101
Restricted cash included in Other current assets		126		204		199
Total cash, cash equivalents and restricted cash	$	2,355	$	2,184	$	1,300

Amounts included in restricted cash are pledged as collateral or restricted to use for workers' compensation and general liability insurance claims.

Receivables

Receivables consist primarily of amounts due from vendors for various vendor funding programs, banks for customer credit card and debit card transactions and mobile phone network operators for device sales and commissions. We establish allowances for uncollectible receivables based primarily on historical collection trends. Our allowances for uncollectible receivables were $24 million and $23 million at February 1, 2020, and February 2, 2019, respectively. We did not have material write-offs during the periods presented.

Merchandise Inventories

Merchandise inventories are recorded at the lower of cost or net realizable value. The weighted average method is used to determine the cost of inventory which includes costs of in-bound freight to move inventory into our distribution centers. Also included in the cost of inventory are certain vendor allowances. Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of sales.

Our inventory valuation also reflects markdown adjustments for the excess of the cost over the net recovery we expect to realize from the ultimate disposition of inventory and establishes a new cost basis. No adjustment is recorded for inventory that we are able to return to our vendors for full credit. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdown adjustments or an increase in the newly established cost basis.

Our inventory valuation reflects adjustments for physical inventory losses (resulting from, for example, theft). Physical inventory is maintained through a combination of full location counts (typically once per year) and more regular cycle counts.

Property and Equipment

Property and equipment are recorded at cost. We depreciate property and equipment to its residual value using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from the date the assets are placed in service to the end of the lease term, which includes optional renewal periods if they are reasonably certain. Accelerated depreciation methods are generally used for income tax purposes.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our Consolidated Balance Sheets and any resulting gain or loss is reflected on our Consolidated Statements of Earnings.

Repairs and maintenance costs are expensed as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.

Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, generally from two years to seven years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software is included in Fixtures and equipment on our Consolidated Balance Sheets. Software maintenance and training costs are expensed in the period incurred. The costs of developing software for sale to customers is expensed as incurred until technological feasibility is established, which generally leads to expensing substantially all costs.

Estimated useful lives by major asset category are as follows (in years):



Asset Category	Useful Life
Buildings	5-35
Leasehold improvements	2-10
Fixtures and equipment	2-15