Papa Johns 2000 Annual Report Download - page 49

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44
2. Significant Accounting Policies (continued)
International revenues are comprised of restaurant sales, royalties and fees received from foreign
franchisees and the sale and distribution of food to foreign franchisees, and are recognized consistently
with the policies applied for revenues generated in the United States.
Cash Equivalents
Cash equivalents consist of all highly liquid investments with a maturity of three months or less at date of
purchase. These investments are carried at cost which approximates fair value.
Investments
We determine the appropriate classification of investment securities at the time of purchase and
reevaluate such designation as of each balance sheet date. Substantially all investment securities held at
December 31, 2000, have been classified as trading securities since it is our intention and ability to liquidate
the investments in early 2001. Trading securities are stated at fair value as determined primarily through
quoted market prices. Unrealized gains and losses for trading securities are included in the statement of
income. The cost of securities sold is based on the specific identification method.
Available -for-sale securities held at December 26, 1999, are stated at fair value as determined primarily
through quoted market prices. Unrealized gains and losses, net of tax, are reported as a separate
component of stockholders' equity and are included in comprehensive income.
Accounts Receivable
Substantially all accounts receivable are due from franchisees for purchases of food and paper products,
restaurant equipment, printing and promotional items, risk management services, information systems and
related services, and for royalties from December sales. Credit is extended based on an evaluation of the
franchisee’ s financial condition and, generally, collateral is not required. We consider substantially all
accounts receivable to be collectible; however, a reserve for uncollectible accounts is established as
deemed necessary based upon overall accounts receivable aging levels and a specific review of accounts
for franchisees with known financial difficulties.
Inventories
Inventories, which consist of food products, paper goods and supplies, smallwares, store equipment and
printing and promotional items, are stated at the lower of cost, determined under the first-in, first-out
(FIFO) method, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets (generally five to ten years for restaurant, commissary and other
equipment, and 20 to 40 years for buildings and improvements). Leasehold improvements are amortized
over the terms of the respective leases, including the first renewal period (generally five to ten years).
Depreciation expense was $30.1 million in 2000, $22.3 million in 1999 and $18.4 million in 1998.