Jack In The Box 2009 Annual Report Download - page 31

Table of Contents
amount of claims occur compared to what was estimated or medical costs increase beyond what was expected, accruals might not be
sufficient, and additional expense may be recorded.
Long-lived Assets — Property, equipment and certain other assets, including amortized intangible assets, are reviewed for
impairment when indicators of impairment are present. This review generally includes a restaurant-level analysis, except when we are
actively selling a group of restaurants in which case we perform our impairment evaluations at the group level. Impairment evaluations for
individual restaurants take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or
remodeled, refranchising expectations, and the maturity of the related market. Impairment evaluations for a group of restaurants take into
consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among
other considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of restaurants subject to
our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss by
the amount which the carrying value of the assets exceeds fair value. Our estimates of cash flows used to assess impairment are subject to
a high degree of judgment and may differ from actual cash flows due to, among other things, economic conditions or changes in operating
performance.
Goodwill and Other Intangibles — We also evaluate goodwill and intangible assets not subject to amortization annually or more
frequently if indicators of impairment are present. If the determined fair values of these assets are less than the related carrying amounts,
an impairment loss is recognized. The methods we use to estimate fair value include future cash flow assumptions, which may differ
from actual cash flows due to, among other things, economic conditions or changes in operating performance. During the fourth quarter
of fiscal 2009, we reviewed the carrying value of our goodwill and indefinite life intangible assets and determined that no impairment
existed as of September 27, 2009.
Allowances for Doubtful Accounts — Our trade receivables consist primarily of amounts due from franchisees for rents on
subleased sites, royalties and distribution sales. We continually monitor amounts due from franchisees and maintain an allowance for
doubtful accounts for estimated losses. This estimate is based on our assessment of the collectibility of specific franchisee accounts, as
well as a general allowance based on historical trends, the financial condition of our franchisees, consideration of the general economy and
the aging of such receivables. We have good relationships with our franchisees and high collection rates; however, if the future financial
condition of our franchisees were to deteriorate, resulting in their inability to make specific required payments, we may be required to
increase the allowance for doubtful accounts.
Legal Accruals — The Company is subject to claims and lawsuits in the ordinary course of its business. A determination of the
amount accrued, if any, for these contingencies is made after analysis of each matter. We continually evaluate such accruals and may
increase or decrease accrued amounts, as we deem appropriate.
Income Taxes — We estimate certain components of our provision for income taxes. These estimates include, among other items,
depreciation and amortization expense allowable for tax purposes, allowable tax credits, effective rates for state and local income taxes and
the tax deductibility of certain other items. We adjust our annual effective income tax rate as additional information on outcomes or events
becomes available.
Our estimates are based on the best available information at the time that we prepare the income tax provision. We generally file our
annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state and local
governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations
of the tax laws.
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In September 2006, the FASB issued authoritative guidance on fair value measurements. This guidance clarifies the definition of
fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure requirements. This guidance
applies under other accounting pronouncements that currently require or permit fair value measurements and is effective for fiscal years
beginning after November 15, 2007, and interim periods within those years. We adopted the provisions of the fair value measurement
guidance for our financial assets and liabilities and have elected to defer adoption for our nonfinancial assets and liabilities until fiscal
year
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