Panera Bread 2009 Annual Report Download - page 59

Sheets. The total amounts expensed for self-insurance were $37.1 million, $33.0 million, and $22.7 million, for the
fiscal years ended December 29, 2009, December 30, 2008, and December 25, 2007, respectively.
Income Taxes
The Company completes the provision for income taxes in accordance with the accounting standard for
income taxes in the Company’s consolidated financial statements and accompanying notes. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and
liabilities from a change in tax rates is recognized in income in the period that includes the enactment date.
In accordance with the authoritative guidance on income taxes issued by the FASB, the Company establishes
additional provisions for income taxes when, despite the belief that tax positions are fully supportable, there remain
certain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than
not to be sustained upon examination by the applicable taxing authority. In the normal course of business, the
Company and its subsidiaries are examined by various Federal, State and foreign tax authorities. The Company
regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior
years in determining the adequacy of its provision for income taxes. The Company continually assesses the
likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and
deferred taxes in the period in which the facts that give rise to a revision become known. The Company classifies
estimated interest and penalties related to the underpayment of income taxes as a component of income taxes in the
Consolidated Statements of Operations.
Capitalization of Certain Development Costs
The Company has elected to account for construction costs in accordance with the accounting standard for real
estate in the Company’s consolidated financial statements and accompanying notes. The Company capitalizes
direct and indirect costs clearly associated with the acquisition, development, design, and construction of new
bakery-cafe locations and fresh dough facilities as these costs have a future benefit to the projects. The types of
specifically identifiable costs capitalized by the Company include primarily payroll and payroll related taxes and
benefit costs incurred within the Company’s development department. The Company’s development department
focuses solely on activities involving the acquisition, development, design, and construction of bakery-cafes and
fresh dough facilities. The Company does not consider for capitalization payroll or payroll-related costs incurred in
other departments, including general and administrative functions, as these other departments do not directly
support the acquisition, development, design, and construction of bakery-cafes and fresh dough facilities. The
Company uses an activity-based methodology to determine the amount of costs incurred within the development
department for Company-owned projects, which are capitalized, and those for franchise-operated projects and
general and administrative activities, which both are expensed as incurred. If the Company subsequently makes a
determination that a site for which development costs have been capitalized will not be acquired or developed, any
previously capitalized development costs are expensed and included in general and administrative expenses in the
Consolidated Statements of Operations.
The Company capitalized $8.4 million, $8.0 million, and $10.2 million direct and indirect costs related to the
development of Company-owned bakery-cafes for the fiscal years ended December 29, 2009, December 30, 2008,
and December 25, 2007, respectively. The Company amortizes capitalized development costs for each bakery-cafe
and fresh dough facility using the straight-line method over the shorter of their estimated useful lives or the related
reasonably assured lease term and includes such amounts in depreciation and amortization in the Consolidated
Statements of Operations. In addition, the Company assesses the recoverability of capitalized costs through the
performance of impairment analyses on an individual bakery-cafe and fresh dough facility basis pursuant to the
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)