Sprouts Farmers Market 2013 Annual Report Download - page 86
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Table of Contents
must be considered. A pattern of sustained profitability is considered significant positive evidence when evaluating a decision to
reverse a valuation allowance. Further, in those cases where a pattern of sustained profitability exists, projected future taxable
income may also represent positive evidence, to the extent that such projections are determined to be reliable given the current
economic environment. Accordingly, our assessment of our valuation allowances requires considerable judgment and could have a
significant negative or positive impact on our current and future earnings.
Self-Insurance Reserves
We use a combination of insurance and self-insurance programs to provide reserves for potential liabilities associated with
general liability, workers’ compensation and team member health benefits. Liabilities for self-insurance reserves are estimated
through consideration of various factors, which include historical claims experience, demographic factors, security factors and other
actuarial assumptions. We believe our assumptions are reasonable, but the estimated reserves for these liabilities could be affected
materially by future events or claims experiences that differ from historical trends and assumptions.
Closed Store Reserve
We recognize a reserve for future operating lease payments associated with facilities that are no longer being utilized in our
current operations. The reserve is recorded based on the present value of the remaining noncancelable lease payments after the
cease use date less an estimate of subtenant income. If subtenant income is expected to be higher than the lease payments, no
accrual is recorded. Lease payments included in the closed store reserve are expected to be paid over the remaining terms of the
respective leases. Our assumptions about subtenant income are based on our experience and knowledge of the area in which the
closed property is located, guidance received from local brokers and agents and existing economic conditions. Adjustments to the
closed store reserve relate primarily to changes in actual or estimated subtenant income and changes in actual lease payments
from original estimates. Adjustments are made for changes in estimate in the period in which the change becomes known,
considering timing of new information regarding market, subleases or other lease updates. Adjustments in the closed store reserves
are recorded in store closure and exit costs in the consolidated statements of operations.
Recently Issued Accounting Pronouncements
See Note 3 to our accompanying audited consolidated financial statements contained elsewhere in this Annual Report on
Form 10-K.
We have determined that all other recently issued accounting standards will not have a material impact on our financial
statements, or do not apply to our operations.
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