IHOP 2008 Annual Report Download - page 112

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
7. Impairments and Closure Charges (Continued)
Impairment and closure charges in 2007 included the impairment of long lived assets for three
restaurants closed in 2007, and impairment losses on two restaurants in which the reacquisition values
exceeded the historical resale values. The decision to close or impair the restaurants in 2007 was a
result of a comprehensive analysis that examined restaurants not meeting minimum return on
investment thresholds and certain other operating performance criteria. The assets for these restaurants
were written down to their estimated fair value.
8. Goodwill and Other Intangible Assets
The significant majority of the Company’s goodwill and other intangible assets arose from the
November 29, 2007 acquisition of Applebee’s. The following table summarizes changes in the carrying
value of goodwill:
Reporting Unit
IHOP Applebee’s Applebee’s
Franchising Franchising Company-operated Total
(In thousands)
Balance, December 31, 2006 ................ $10,767 $ — $ — $ 10,767
Acquisition of business .................... — 537,609 182,352 719,961
Balance, December 31, 2007 ................ 10,767 537,609 182,352 730,728
Purchase price adjustments ................ — 149,094 (57,547) 91,547
Annual impairment test ................... — — (113,505) (113,505)
Refranchising .......................... — — (11,300) (11,300)
Balance, December 31, 2008 ................ $10,767 $686,703 $ — $ 697,470
The purchase price adjustments arose from the finalization of the preliminary purchase price
allocation during the allowable one-year allocation period (see Note 3, Business Acquisition). The
impairment charge resulted from the annual test for impairment of goodwill (see Note 7, Impairment
and Closure Charges). The refranchising adjustments resulted from the refranchising of restaurants (see
Note 5, Assets Held For Sale).
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