Gap (GPS)

Property and Equipment

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:

The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts with any resulting gain or loss included in operating expenses in the Consolidated Statements of Earnings. Maintenance and repairs are expensed as incurred.

Interest related to assets under construction is capitalized during the construction period up to the amount of interest expense actually incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and consist of the following:

Depreciation expense for property and equipment was $643 million, $625 million, and $601 million for fiscal 2008, 2007, and 2006, respectively.

Interest expense of $8 million, $10 million, and $8 million related to assets under construction was capitalized in fiscal 2008, 2007, and 2006, respectively.

We recorded a charge for the impairment of long-lived assets, primarily related to our Stores reportable segment, of $5 million, $13 million, and $29 million for fiscal 2008, 2007, and 2006, respectively, which is classified as operating expenses in the Consolidated Statements of Earnings. See Note 4 of Notes to the Consolidated Financial Statements for the impairment charge related to the closure of Forth & Towne.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and consist of the following:

Depreciation expense for property and equipment was $625 million, $601 million, and $656 million for fiscal 2007, 2006, and 2005, respectively.

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Interest of $10 million, $8 million, and $11 million related to assets under construction was capitalized in fiscal 2007, 2006, and 2005, respectively.

We recorded a charge for the impairment of long-lived assets of $13 million, $29 million, and $3 million for fiscal 2007, 2006, and 2005, respectively. See Note 3 for the impairment charge related to the closure of Forth & Towne.

Property and Equipment

Property and equipment are stated at cost less
accumulated depreciation and consist of the following:

Depreciation expense for property and equipment was $625 million, $601 million, and $656 million for fiscal 2007, 2006, and
2005, respectively.

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Interest of $10 million, $8 million, and $11 million
related to assets under construction was capitalized in fiscal 2007, 2006, and 2005, respectively.

We recorded a charge for the impairment of long-lived assets of
$13 million, $29 million, and $3 million for fiscal 2007, 2006, and 2005, respectively. See Note 3 for the impairment charge related to the closure of Forth & Towne.

FACE="ARIAL" SIZE="2">Lease Rights and Key Money

Lease rights are stated at cost less accumulated amortization and are included in other long-term assets on
the Consolidated Balance Sheets as follows:

Both the cost and accumulated amortization of lease rights are impacted by fluctuations in foreign currency rates.
Amortization expense associated with lease rights was $6 million in each of fiscal 2007, 2006, and 2005.

Key money is stated at cost less accumulated amortization
and is included in other long-term assets on the Consolidated Balance Sheets as follows:

Both the cost and accumulated amortization of key money are impacted by fluctuations in foreign currency rates. Amortization
expense associated with key money was $4 million in each of fiscal 2007 and 2006.

Property and Equipment

Property and equipment are stated at cost and consist of the following:

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Depreciation expenses were $603 million, $657 million, and $690 million during fiscal 2006, 2005, and 2004. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:

The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts with any resulting gain or loss included in net earnings. Maintenance and repairs are charged to expenses as incurred.

Interest costs related to assets under construction are capitalized during the construction period. Interest of $8 million, $11 million, and $10 million was capitalized in fiscal 2006, 2005, and 2004, respectively.

Property and Equipment

Property and equipment are stated at cost and consists of the following:

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:

The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net earnings. Maintenance and repairs are charged to expenses as incurred.

Interest costs related to assets under construction are capitalized during the construction period. Interest of $11 million, $10 million and $9 million was capitalized in fiscal 2005, 2004 and 2003, respectively.

Property and Equipment

Property and equipment are stated at cost. We identify our property and equipment in the following categories:

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:

The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net earnings. Maintenance and repairs are charged to expenses as incurred.

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GAP INC. FINANCIALS 2004

During fiscal 2004, we recorded entries to remove $375 million of substantially depreciated assets that were no longer in service. This asset adjustment resulted from a recent physical inventory of certain non-store fixed assets. This adjustment had no material net impact to the Consolidated Balance Sheet and had no impact on cash flows from investing activities. We recorded $9 million in operating expense on the Consolidated Statement of Operations during fiscal 2004 in connection with this physical inventory.

Interest costs related to assets under construction are capitalized during the construction period. Interest of $10 million, $9 million and $11 million was capitalized in fiscal 2004, 2003 and 2002, respectively.