Coldwater Creek (CWTR)

Impairment of Long-Lived Assets

        Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas, are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by an asset or asset group is less than its carrying amount, it is considered to be impaired and would be written down to its fair value. During the second quarter of fiscal 2008, management determined that our day spa concept needed to be evaluated for impairment. Consequently, we concluded that certain day spa locations were impaired and we recorded a charge of $1.5 million.

        The deterioration of the financial, credit, and housing markets have had a severe impact on consumer confidence and discretionary spending. These market conditions have had a negative effect on our business resulting in us evaluating certain retail stores for impairment. Based on this evaluation we concluded that these retail stores were not impaired. Though we believe that no impairment of our long-lived assets exists as of January 31, 2009, if market conditions were to continue to deteriorate for

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an extended period of time, it is possible that we could record impairments of certain long-lived assets in the future.

Impairment of Long-Lived Assets

        Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas, are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by an asset or asset group is less than its carrying amount, it is considered to be impaired and would be written down to its fair value. During the second quarter of fiscal 2008, management determined that our day spa concept needed to be evaluated for impairment. Consequently, we concluded that certain day spa locations were impaired and we recorded a charge of $1.5 million.

        The deterioration of the financial, credit, and housing markets have had a severe impact on consumer confidence and discretionary spending. These market conditions have had a negative effect on our business resulting in us evaluating certain retail stores for impairment. Based on this evaluation we concluded that these retail stores were not impaired. Though we believe that no impairment of our long-lived assets exists as of January 31, 2009, if market conditions were to continue to deteriorate for

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an extended period of time, it is possible that we could record impairments of certain long-lived assets in the future.

Impairment of Long-Lived Assets

        Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas,
are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by
an asset or asset group is less than its carrying amount, it is considered to be impaired and would be written down to its fair value. During the second quarter of fiscal 2008, management determined
that our day spa concept needed to be evaluated for impairment. Consequently, we concluded that certain day spa locations were impaired and we recorded a charge of $1.5 million.

        The
deterioration of the financial, credit, and housing markets have had a severe impact on consumer confidence and discretionary spending. These market conditions have had a negative
effect on our business resulting in us evaluating certain retail stores for impairment. Based on this evaluation we concluded that these retail stores were not impaired. Though we believe that no
impairment of our long-lived assets exists as of January 31, 2009, if market conditions were to continue to deteriorate for

45

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an
extended period of time, it is possible that we could record impairments of certain long-lived assets in the future.

Impairment of Long-Lived Assets

        Long-lived assets, including leasehold improvements, equipment, and furniture and fixtures at our retail stores and day spas, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future

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COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

        We introduced the day spa concept on a limited basis resulting in the opening of six day spas in fiscal 2006 and three day spas in fiscal 2007. As of August 2, 2008, the first day spa we opened had been operating for approximately 28 months while the last day spa had been operating for approximately nine months, for an average opening period of approximately 21 months for all nine day spas. Management determined in the second quarter of fiscal 2008 that the day spa concept had been operating for a sufficient amount of time to perform a detailed impairment evaluation, given that the concept continued to incur operating and cash flow losses. Consequently, we determined that the leasehold improvements, equipment, and furniture and fixtures at certain day spa locations were impaired and recorded a charge of $1.5 million. During fiscal 2007, we recorded impairment charges of $0.6 million related to long-lived assets at certain premium retail stores. No impairments were recorded during fiscal 2006. We used the expected present value model, in which multiple cash flow scenarios that reflect the range of possible outcomes and a risk-free rate were used to estimate fair value.

        The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices, labor and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions and competitive conditions in the industry.

Impairment of Long-Lived Assets

        Long-lived assets, including leasehold improvements, equipment, and furniture and fixtures at our retail stores and day spas, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future

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COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

        We introduced the day spa concept on a limited basis resulting in the opening of six day spas in fiscal 2006 and three day spas in fiscal 2007. As of August 2, 2008, the first day spa we opened had been operating for approximately 28 months while the last day spa had been operating for approximately nine months, for an average opening period of approximately 21 months for all nine day spas. Management determined in the second quarter of fiscal 2008 that the day spa concept had been operating for a sufficient amount of time to perform a detailed impairment evaluation, given that the concept continued to incur operating and cash flow losses. Consequently, we determined that the leasehold improvements, equipment, and furniture and fixtures at certain day spa locations were impaired and recorded a charge of $1.5 million. During fiscal 2007, we recorded impairment charges of $0.6 million related to long-lived assets at certain premium retail stores. No impairments were recorded during fiscal 2006. We used the expected present value model, in which multiple cash flow scenarios that reflect the range of possible outcomes and a risk-free rate were used to estimate fair value.

        The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices, labor and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions and competitive conditions in the industry.

Impairment of Long-Lived Assets

        Long-lived assets, including leasehold improvements, equipment, and furniture and fixtures at our retail stores and day
spas, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future

58

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COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

undiscounted
cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset.

        We
introduced the day spa concept on a limited basis resulting in the opening of six day spas in fiscal 2006 and three day spas in fiscal 2007. As of August 2, 2008, the first day
spa we opened had been operating for approximately 28 months while the last day spa had been operating for approximately nine months, for an average opening period of approximately
21 months for all nine day spas. Management determined in the second quarter of fiscal 2008 that the day spa concept had been operating for a sufficient amount of time to perform a detailed
impairment evaluation, given that the concept continued to incur operating and cash flow losses. Consequently, we determined that the leasehold improvements, equipment, and furniture and fixtures at
certain day spa locations were impaired and recorded a charge of $1.5 million. During fiscal 2007, we recorded impairment charges of $0.6 million related to long-lived assets
at certain premium retail stores. No impairments were recorded during fiscal 2006. We used the expected present value model, in which multiple cash flow scenarios that reflect the range of possible
outcomes and a risk-free rate were used to estimate fair value.

        The
fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices,
labor and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions and
competitive conditions in the industry.

Impairment of Long-Lived Assets

Long-lived assets, including leasehold improvements, equipment, and furniture and fixtures at our retail stores and day spas, are reviewed for impairment on a semi-annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset. During the nine months ended November 1, 2008, we recorded an impairment charge of $1.5 million related to the long-lived assets of certain day spa locations within our retail segment. No impairments were recorded during the three months ended November 1, 2008. During the three and nine months ended November 3, 2007, we recorded an impairment charge of $0.6 million related to long-lived assets of one of our premium retail stores.

We introduced the day spa concept on a limited basis resulting in the opening of six day spas in fiscal 2006 and three day spas in fiscal 2007.  As of August 2, 2008, the first day spa we opened had been operating for approximately 28 months while the last day spa had been operating for approximately nine months, for an average opening period of approximately 21 months for all nine day spas.  Management determined in the second quarter of fiscal 2008 that the day spa concept had been operating for a sufficient amount of time to perform a detailed impairment evaluation, given that the concept continued to incur operating and cash flow losses.  This evaluation was also done in conjunction with our established policy to review all retail locations for impairment on a semi-annual basis. Consequently, we determined that the leasehold improvements, equipment, and furniture and fixtures at certain day spa locations were impaired. We used the expected present value model, in which multiple cash flow scenarios that reflect the range of possible outcomes and a risk-free rate were used to estimate fair value.

The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices, labor and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions and competitive conditions in the day spa industry.

The deterioration of the financial, credit, and housing markets have had a severe impact on consumer confidence and discretionary spending. These market conditions have had a negative effect on our business.  Though we believe that no impairment of our long-lived assets exist as of November 1, 2008, if market conditions were to continue to deteriorate for an extended period of time, it is possible that we could record impairments of certain long-lived assets in the future.

8

Impairment of Long-Lived Assets

Long-lived assets, including leasehold improvements, equipment, and furniture and fixtures at our retail stores and day spas, are reviewed for impairment on a semi-annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset. During the three and six months ended August 2, 2008, we recorded an impairment charge of $1.5 million related to the long-lived assets of certain day spa locations within our retail segment. No impairments were recorded during the three and six months ended August 4, 2007.

We introduced the day spa concept on a limited basis resulting in the opening of six day spas in fiscal 2006 and three day spas in fiscal 2007.  As of August 2, 2008, the first day spa we opened has been operating for approximately 28 months while the last day spa has been operating for approximately nine months, for an average opening period of approximately 21 months for all nine day spas.  Management determined in the second quarter of fiscal 2008 that the day spa concept has been operating for a sufficient amount of time to perform a detailed impairment evaluation, given that the concept continues to incur operating and cash flow losses.   This evaluation was also done in conjunction with our established policy to review all retail locations for impairment on a semi-annual basis. Consequently, we determined that the leasehold improvements, equipment, and furniture and fixtures at certain day spa locations were impaired. We used the expected present value model, in which multiple cash flow scenarios that reflect the range of possible outcomes and a risk-free rate were used to estimate fair value.

The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices, labor and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions and competitive conditions in the day spa industry.

Impairment of Long-Lived Assets

        Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas, are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by an asset or asset group is less than its carrying amount, it is considered to be impaired and would be written down to its fair value. Except for the impairment loss of $0.6 that we recorded in fiscal 2007 related to certain retail stores, we have not experienced any events that would indicate a potential impairment of the assets relating to our retail stores and day spas, but if circumstances change we could be required to record a loss for the impairment of long-lived assets. For example, given the infancy of the day spa concept and based upon management's current expectations we do not believe an impairment of the related assets exists. If management's current expectations change, we could be required to record an impairment loss on assets related to the day spa concept.

Impairment of Long-Lived Assets

        Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas, are subject to a review for
impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by an asset or asset group is
less than its carrying amount, it is considered to be impaired and would be written down to its fair value. Except for the impairment loss of $0.6 that we recorded in fiscal 2007 related to certain
retail stores, we have not experienced any events that would indicate a potential impairment of the assets relating to our retail stores and day spas, but if circumstances change we could be required
to record a loss for the impairment of long-lived assets. For example, given the infancy of the day spa concept and based upon management's current expectations we do not believe an
impairment of the related assets exists. If management's current expectations change, we could be required to record an impairment loss on assets related to the day spa concept.

Impairment of Long-Lived Assets

Long-lived assets, more specifically leasehold improvements and furniture and fixtures at our retail stores and day spas, are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the future undiscounted cash flows generated by an asset or asset group is less than it’s carrying amount, it is considered to be impaired and would be written down to its fair value. Currently we have not experienced any events that would indicate a potential impairment of the assets relating to our retail stores and day spas, but if circumstances change we could be required to record a loss for the impairment of long-lived assets. For example, given the infancy of the day spa concept and based upon management’s current forecasts we do not believe an impairment of the related assets exists. If management’s current forecasted expectations do not materialize in the future, we could be required to record an impairment loss on assets related to the day spa concept.