Jack In The Box 2012 Annual Report Download - page 50

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costs when those costs are probable and reasonably estimable.
Segment reporting — An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues
and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision makers in deciding how to allocate
resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. We operate our business in two operating
segments, Jack in the Box and Qdoba. Refer to Note 17, Segment Reporting, for additional discussion regarding our segments.
Effect of new accounting pronouncements — In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which was issued to update the language used in
existing guidance to better align U.S. GAAP and IFRS fair value measurement guidance. This update also requires increased disclosure of quantitative and
qualitative information about unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. Other than
requiring additional disclosures, adoption of this new guidance in the second quarter did not have a significant impact on our consolidated financial
statements.
In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite – Lived Intangible Assets for Impairment. This pronouncement was issued to
simplify how entities test for impairment of indefinite-lived intangible assets. Under this pronouncement, an entity has the option first to assess qualitative
factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If the qualitative assessment results in a more than
50% likely result that the fair value of the reporting unit is less than the carrying amount, then the entity must perform the quantitative impairment test by
comparing the fair value with the carrying amount in accordance with ASC Topic 350, Intangibles – Goodwill and Other. This pronouncement is effective
for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. We adopted this
pronouncement in the fourth quarter of fiscal 2012. The adoption did not have a material effect on our consolidated financial statements.
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During the fourth quarter of 2012, we entered into an agreement with a third party distribution service provider pursuant to a Board-approved plan to sell our
Jack in the Box distribution business. Our distribution business assets to be sold are classified as assets of discontinued operations in the consolidated
balance sheet for each year presented. The operations and cash flows of the business will be eliminated and in accordance with the provisions of ASC 360,
Property, Plant, and Equipment, the results are reported as discontinued operations for all periods presented.
The following is a summary of our distribution business assets held for sale as of September 30, 2012 and October 2, 2011 ( in thousands):
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Inventories
$26,844
$31,402
Property and equipment, net
3,747
4,041
Total assets of discontinued operations
$30,591
$35,443
The following is a summary of our distribution business's operating results, which are included in discontinued operations for fiscal 2012, 2011 and 2010 (in
thousands):
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Revenue
$616,982
$530,959
$397,977
Operating loss before income tax benefit
$(8,777)
$(2,429)
$(1,653)
The operating loss in fiscal 2012 includes charges of $6.0 million for accelerated depreciation of a long-lived asset which will be disposed of upon completion
of the transaction and $0.7 million for future lease commitments. We expect to complete the sale in the first quarter of fiscal 2013. The loss on the sale of the
distribution business is not expected to be material.
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