Reitmans (Canada) Limited is a leading Canadian retailer that operates more than 675 stores under the Reitmans, RW & Co., Thyme Maternity, Penningtons, and Addition Elle banners. The following information is an extract from Reitmans’ annual report for its fiscal year ended January 28, 2017.

EXHIBIT 8.24 Excerpt from Reitman Inc.’s 2016 Annual Report

Reitmans’ depreciation policies for its property and equipment state that:
Depreciation is recognized in net earnings on a straight-line basis over the estimated useful lives of each component on an item of property and equipment. Land is not depreciated. Leasehold improvements are depreciated over the lesser of the estimated useful life of the asset and the lease term. Assets not in service include expenditures incurred to-date for equipment not yet available for use. Depreciation of assets not in service begins when they are ready for their intended use. Depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.

The estimated useful lives for the current and comparative periods are as follows:
Buildings .................................................    10 to 50 years
Fixtures and equipment .......................       3 to 20 years
Leasehold improvements ....................    6.7 to 10 years

Required

a. Determine the average age percentage of Reitmans’ property and equipment. Compare this with the ratio for Dollarama (determine using the information in Appendix A), and identify which company would be able to go longer without replacing its assets based on this ratio.

b. Determine the average age (in years) of Reitmans’ leasehold improvements. Compare this with the ratio determined for Dollarama in the chapter, and identify which company’s leased stores are newer.

c. Given that Reitmans estimates that its fixtures and equipment will have useful lives between 3 and 20 years, determine the annual straight-line depreciation rate that Reitmans is using for its fixtures
and equipment. 

d. Explain, in your own words, why Reitmans does not begin depreciating assets until they are ready for their intended use.

e. If Reitmans’ net carrying amount for property and equipment was $124,106 thousand for its year ended January 28, 2017, (as shown above) and $134,363 thousand for its year ended January 30, 2016, and its sales revenue was $951,989 thousand for fiscal year ended January 28, 2017, calculate Reitman’s fixed asset turnover ratio. Compare this with the ratio for Dollarama (see Appendix A), and comment on which company did a better job of using its long-term assets to generate revenues.

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Property and Equipment (in thousands of Canadian dollars) Fixtures and Equipment Leasehold Buildings $40,182 Land Total Improvements $106,613 Cost $5,860 $122,149 67,051 55,098 $274,804 Accumulated Depreciation Net Carrying Amount Depreciation Expense 16,419 150,698 67,228 39,385 5,860 23,763 124,106 18,573 36,210 1,683 15,954