Panera Bread 2010 Annual Report Download - page 58

Trade and Other Accounts Receivable, net
Trade accounts receivable consists primarily of amounts due to the Company from its franchisees for
purchases of fresh dough and other products from the Company’s fresh dough facilities, royalties due to the
Company from franchisee sales, and receivables from credit card sales. The Company does not require collateral
and maintains reserves for potential uncollectible accounts based on historical losses and existing economic
conditions, when relevant. The allowance for doubtful accounts at December 28, 2010 and December 29, 2009 was
$0.2 million and $0.1 million, respectively.
As of December 28, 2010, other accounts receivable, net consisted primarily of an insurance receivable for
litigation settlements of $7.1 million, tenant allowances due from landlords of $4.0 million, and $3.3 million due
from wholesalers of the Company’s gift cards. As of December 29, 2009, other accounts receivable consisted
primarily of tenant allowances due from landlords of $3.0 million, $2.8 million due from wholesalers of the
Company’s gift cards, and a $3.3 million receivable from the Company’s former Canadian franchisee representing
the cost of the three bakery-cafes Panera developed on behalf of the franchisee (see Note 13 for further explanation).
Inventories
Inventories, which consist of food products, paper goods and supplies, and promotional items, are valued at the
lower of cost or market, with cost determined under the first-in, first-out method.
Property and Equipment
Property, equipment, and leasehold improvements are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated using the
straight-line method over the shorter of their estimated useful lives or the related reasonably assured lease term.
Costs incurred in connection with the development of internal-use software are capitalized in accordance with the
accounting standard for internal-use software, and are amortized over the expected useful life of the software. The
estimated useful lives used for financial statement purposes are:
Leasehold improvements ............................................... 15-20years
Machinery and equipment . . . ........................................... 3-10years
Furniture and fixtures ................................................. 2-7years
External signage ..................................................... 3-7years
Software........................................................... 3-5years
Interest, to the extent it is incurred in connection with the construction of new locations or facilities, is
capitalized. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the
asset’s estimated useful life. No interest was incurred for such purposes for the fiscal years ended December 28,
2010 and December 29, 2009. Interest costs capitalized were approximately $0.1 million for fiscal year ended
December 30, 2008.
Upon retirement or sale, the cost of assets disposed and their related accumulated depreciation are removed
from the Company’s accounts. Any resulting gain or loss is credited or charged to operations. Maintenance and
repairs are charged to expense when incurred, while certain improvements are capitalized. The total amounts
expensed for maintenance and repairs was $33.8 million, $30.7 million, and $27.4 million for the fiscal years ended
December 28, 2010, December 29, 2009, and December 30, 2008, respectively.
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of net assets acquired. Goodwill and
indefinite-lived intangible assets recorded in the financial statements are required to be evaluated for periodic
evaluation for impairment when circumstances warrant, or at least once per year. Goodwill is tested for impairment
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)