Jack In The Box 2009 Annual Report Download - page 48

Table of Contents
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basis over the remaining initial lease term, generally 18 years. Acquired franchise contract costs, which represent the acquired value of
franchise contracts, are amortized over the term of the franchise agreements, generally 10 years, based on the projected royalty revenue
stream. Our trademark asset, recorded in connection with our acquisition of Qdoba Restaurant Corporation in fiscal 2003, has an
indefinite life and is not amortized.
Goodwill and intangible assets not subject to amortization are evaluated for impairment 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. We performed our annual impairment tests of goodwill and non-amortized intangible assets in the fourth quarter of fiscal 2009
and determined there was no impairment.
Company-owned life insurance — We have purchased company-owned life insurance (“COLI”) policies to support our non-
qualified benefit plans. The cash surrender values of these policies were $66.9 million and $65.3 million as of September 27, 2009 and
September 28, 2008, respectively, and are included in other assets, net in the accompanying consolidated balance sheets. Changes in cash
surrender values are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings.
These policies reside in an umbrella trust for use only to pay plan benefits to participants or to pay creditors if the Company becomes
insolvent. As of September 27, 2009 and September 28, 2008, the trust also included cash of $1.4 million in both years.
Leases — We review all leases for capital or operating classification at their inception under the Financial Accounting Standards
Board (“FASB”) authoritative guidance for leases. Our operations are primarily conducted under operating leases. Within the provisions
of certain leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods. The effects of
the holidays and escalations have been reflected in rent expense on a straight-line basis over the expected lease term. Differences between
amounts paid and amounts expensed are recorded as deferred rent. The lease term commences on the date when we have the right to
control the use of the leased property. Certain leases also include contingent rent provisions based on sales levels, which are accrued at the
point in time we determine that it is probable such sales levels will be achieved.
Retirement plans — In fiscal 2007, we adopted the authoritative guidance issued by the FASB which required an employer to
recognize in its statement of financial position the funded status of a benefit plan and recognize as a component of other comprehensive
income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of net periodic
benefit costs pursuant to prior existing guidance. The adoption resulted in an after-tax adjustment to accumulated other comprehensive
income (loss) of $20.2 million related to a reclassification of unrecognized actuarial gains and losses from assets and liabilities to a
component of accumulated other comprehensive income (loss), as well as a requirement to recognize over and under funding of our
pension and post-retirement health plans.
On September 29, 2008, we adopted the authoritative guidance issued by the FASB, which requires that companies measure their
retirement plan assets and benefit obligations at the end of their fiscal year. Refer to Note 11, Retirement Plans, for additional information
and disclosures related to our defined benefit and post retirement plans.
Fair value measurements — On September 29, 2008, we adopted the authoritative guidance issued by the FASB, which defines
fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements, for our financial
assets and liabilities. The adoption did not have a material impact on our consolidated financial statements. As permitted by the
authoritative guidance, we elected to defer the fair value guidance for our non-financial assets and liabilities until the first quarter of fiscal
2010. Refer to Note 5, Fair Value Measurements, for disclosure related to our financial assets and liabilities measured at fair value.
Franchise arrangements Franchise arrangements generally provide for franchise fees and continuing fees based upon a
percentage of sales. Among other things, a franchisee may be provided the use of land and building, generally for a period of 20 years,
and is required to pay negotiated rent, property taxes, insurance and maintenance. In order to renew a franchise agreement upon
expiration, a franchisee must obtain the Company’s approval and pay then current fees. Expenses associated with the issuance of the
franchise are expensed as incurred.
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