Harris Teeter 2007 Annual Report Download - page 39

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RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Impairment of Long-lived Assets and Closed Store Obligations
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “Impairment of Long-
Lived Assets,” the Company assesses its long-lived assets for possible impairment whenever events or changes
in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability is measured by a
comparison of the carrying amount to the net non-discounted cash flows expected to be generated by the asset.
An impairment loss is recognized for any excess of net book value over the estimated fair value of the asset
impaired, and recorded as an offset to the asset value. The fair value is estimated based on expected future cash
flows or third party valuations, if available.
The value of property and equipment associated with closed stores and facilities is adjusted to reflect
recoverable values based on the Company’s prior history of disposing of similar assets and current economic
conditions. Management continually reviews its fair value estimates and records impairment charges for assets
held for sale when management determines, based on new information which it believes to be reliable, that such
charges are appropriate.
The Company records liabilities for closed stores that are under long-term lease agreements. The liability
represents an estimate of the present value of the remaining non-cancelable lease payments after the anticipated
closing date, net of estimated subtenant income. The closed store liabilities usually are paid over the lease
terms associated with the closed stores, unless settled earlier. Harris Teeter management estimates the subtenant
income and future cash flows based on its historical experience and knowledge of (1) the market in which the
store is located, (2) the results of its previous efforts to dispose of similar assets and (3) the current economic
conditions.
Investments
The Company’s Harris Teeter subsidiary invests in certain real estate development projects, with a managing
partner or partners, in which Harris Teeter either operates or plans to operate a supermarket. American & Efird
has investments in various non-consolidated foreign entities in which they hold a minority interest and a 50%
ownership interest in a joint venture in China. These investments, depending on the state of development, are
accounted for either under the equity method of accounting or at cost. The Company continues to hold certain
equity investments in a few emerging growth companies as a result of investments made in certain venture
capital funds during prior years. Real estate and other investments are carried at the lower of cost or market and
are periodically reviewed for potential impairment in accordance SFAS No. 144 “Accounting for the Impairment
or Disposal of Long-Lived Assets.”
Goodwill and Other Intangibles
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and certain other
intangibles with indefinite lives are no longer amortized, but instead are tested for impairment at least annually,
or more frequently, if circumstances indicate a potential impairment. Intangible assets with finite, measurable
lives continue to be amortized over their respective useful lives until they reach their estimated residual values,
and are reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets.”
Self-Insurance
The Company is self-insured for most U.S. workers’ compensation claims, healthcare claims, and general
liability and automotive liability losses. The Company has purchased insurance coverage in order to establish
certain limits to its exposure on a per claim basis. The Company determines the estimated reserve required for