Financial Review 2004 Notes to  Consolidated Financial Statements (Dollar amounts in thousands, except per share data) Operations and Principles of Consolidation We also license 38 restaurants in Japan. All significant intercompany  balances and transactions have been eliminated in consolidation.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the opera- tions of Darden Restaurants, Inc. and its wholly owned  subsidiaries. We own and operate various restaurant con- cepts located in the United States and Canada, with no franchising.  Our fiscal year ends on the last Sunday in May. Fiscal 2004 consisted  of 53 weeks of operation. Fiscal 2003 and 2002 both consisted of 52 weeks of operation.  Cash equivalents include highly liquid investments such as U.S.  treasury bills, taxable municipal bonds, and money market funds that  have a maturity of three months or less. Amounts receivable from  credit card companies are also considered cash equivalents because  they are both short-term and highly liquid in nature and are typically  converted to cash within three days of the sales transaction. Inventories are valued at the lower of weighted-average cost or market.  Land, buildings, and equipment are recorded at cost less accumulated  depreciation. Building components are depreciated over estimated  useful lives ranging from seven to 40 years using the straight-line  method. Leasehold improvements, which are a component of  buildings, are amortized over the lesser of the lease term or the  estimated useful lives of the related assets using the straight-line  method. Equipment is depreciated over estimated useful lives  ranging from two to ten years also using the straight-line method.  Accelerated depreciation methods are generally used for income  tax purposes. Depreciation and amortization expense associated  with land, buildings, and equipment amounted to $203,349,  $184,963 and $162,784, in fiscal 2004, 2003, and 2002, respectively. In fiscal 2004, 2003, and 2002, we had losses on disposal of land, buildings, and equipment of $104, $2,456, and $1,803, respectively, which were included in selling, general, and administrative expenses. Capitalized software, which is a component of other assets, is  recorded at cost less accumulated amortization. Capitalized soft- ware is amortized using the straight-line method over estimated  useful lives ranging from three to ten years. The cost of capitalized software at May 30, 2004, and May 25, 2003, amounted to $46,629  and $44,018, respectively. Accumulated amortization as of May 30,  2004, and May 25, 2003, amounted to $14,301 and $9,963, respec- tively. Amortization expense associated with capitalized software  amounted to $6,655, $6,255, and $3,045, in fiscal 2004, 2003, and  2002, respectively. In August 2001, we caused a trust that we previously had established  to purchase life insurance policies covering certain of our officers  and other key employees (trust-owned life insurance or TOLI).  The trust is the owner and sole beneficiary of the TOLI policies.  The policies were purchased to offset a portion of our obligations  under our non-qualified deferred compensation plan. The cash  surrender value of the policies is included in other assets while  changes in cash surrender value are included in selling, general,  and administrative expenses. The costs of obtaining non-transferable liquor licenses that are  directly issued by local government agencies for nominal fees are  expensed as incurred. The costs of purchasing transferable liquor  licenses through open markets in jurisdictions with a limited num- ber of authorized liquor licenses are capitalized. Annual liquor  license renewal fees are expensed.  Land, buildings, and equipment and certain other assets, including capitalized software costs and liquor licenses, are reviewed for  impairment whenever events or changes in circumstances indicate  that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a  comparison of the carrying amount of the assets to the future undis- counted net cash flows expected to be generated by the assets.  Identifiable cash flows are measured at the lowest level for which  they are largely independent of the cash flows of other groups of  assets and liabilities, generally at the restaurant level. If such assets  are determined to be impaired, the impairment recognized  38  Darden Restaurants Capitalized Software Costs Trust-Owned Life Insurance Fiscal Year Cash Equivalents Inventories Land, Buildings, and Equipment Liquor Licenses Impairment of Long-Lived Assets