IHOP 2009 Annual Report Download - page 112

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
3. Receivables (Continued)
and 8.77% per annum at December 31, 2009 and 2008, respectively, and are collateralized by the
franchise. The term of an equipment lease contract coincides with the term of the corresponding
restaurant building lease. Equipment lease contracts are due in equal weekly installments, primarily
bear interest averaging 10.15% and 10.11% per annum at December 31, 2009 and 2008, respectively,
and are collateralized by the equipment. Where applicable, franchise fee notes, equipment contracts
and building leases contain cross-default provisions wherein a default under one constitutes a default
under all. There is not a disproportionate concentration of credit risk in any geographic area.
The following table summarizes the activity in the allowance for doubtful accounts:
Allowance for Doubtful Accounts
(In thousands)
Balance at December 31, 2006 ........................................... $1,359
Provision ......................................................... 2,039
Charge-offs ....................................................... (399)
Balance at December 31, 2007 ........................................... 2,999
Provision ......................................................... 1,280
Charge-offs ....................................................... (1,548)
Recoveries ........................................................ 210
Balance at December 31, 2008 ........................................... 2,941
Provision ......................................................... 1,645
Charge-offs ....................................................... (1,279)
Recoveries ........................................................ 115
Balance at December 31, 2009 ........................................... $3,422
4. Assets Held For Sale
The Company classifies assets as held for sale and ceases the depreciation of the assets when there
is a plan for disposal of the assets and those assets meet the held for sale criteria as defined in
U.S. GAAP. Reacquired franchises, property and equipment and other assets held for sale are
accounted for on the specific identification basis.
Reacquired franchises
For reacquired franchises, the Company records the franchise and equipment at the lower of
(1) the sum of the franchise receivables and costs of reacquisition, or (2) the estimated net realizable
value at the reacquisition date. Pending the sale of such franchise, the carrying value is amortized
ratably over the remaining life of the asset or lease, and the estimated net realizable value is evaluated
in conjunction with our impairment evaluation of long-lived assets. There was $469,000 in reacquired
franchises and equipment included in assets held for sale at December 31, 2009 and none at
December 31, 2008.
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