Dunkin' Donuts 2012 Annual Report Download - page 76

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The comparison between the carrying value of our investments and the underlying equity in net assets of investments is
presented in the table below (in thousands):
BR Japan BR Korea
December 29,
2012
December 31,
2011
December 29,
2012
December 31,
2011
Carrying value of investment $ 95,776 103,830 77,749 60,806
Underlying equity in net assets of investment 54,410 56,319 88,514 73,839
Carrying value in excess of (less than) the underlying
equity in net assets(a) $ 41,366 47,511 (10,765)(13,033)
(a) The excess carrying values over the underlying equity in net assets of BR Japan is primarily comprised of amortizable
franchise rights and related tax liabilities and nonamortizable goodwill, all of which were established in the BCT
Acquisition. The deficit of cost relative to the underlying equity in net assets of BR Korea is primarily comprised of an
impairment of long-lived assets, net of tax, recorded in fiscal year 2011.
The aggregate value of the Company's investment in BR Japan, based on its quoted market price on the last business day of the
year, is approximately $154.9 million. No quoted market prices are available for the Company's investment in BR Korea.
Net income (loss) of equity method investments in the consolidated statements of operations for fiscal years 2012, 2011, and
2010 includes $689 thousand, $868 thousand, and $897 thousand, respectively, of net expense related to the amortization of
intangible franchise rights and related deferred tax liabilities noted above. As required under the equity method of accounting,
such net expense is recorded in the consolidated statements of operations directly to net income (loss) of equity method
investments and not shown as a component of amortization expense.
Total estimated amortization expense, net of deferred tax benefits, to be included in net income of equity method investments
for fiscal years 2013 through 2017 is as follows (in thousands):
Fiscal year:
2013 $ 569
2014 497
2015 419
2016 337
2017 249
During the fourth quarter of 2011, management concluded that indicators of potential impairment were present related to our
investment in BR Korea based on continued declines in the operating performance and future projections of the Korea Dunkin’
Donuts business. Accordingly, the Company engaged an independent third-party valuation specialist to assist the Company in
determining the fair value of our investment in BR Korea. The valuation was completed using a combination of discounted
cash flow and income approaches to valuation. Based in part on the fair value determined by the independent third-party
valuation specialist, the Company determined that the carrying value of the investment in BR Korea exceeded fair value by
$19.8 million, and as such the Company recorded an impairment charge in that amount in the fourth quarter of 2011. The
impairment charge was allocated to the underlying goodwill, intangible assets, and long-lived assets of BR Korea, and therefore
resulted in a reduction in depreciation and amortization, net of tax, of $3.6 million and $1.0 million, in fiscal years 2012 and
2011, respectively, which is recorded within net income (loss) of equity method investments in the consolidated statements of
operations.