Supercuts 2008 Annual Report Download - page 34

schools was less than the current carrying value of this reporting unit's net assets, including goodwill. Thus, a $23.0 million pre-tax
($19.6 million after tax), non-cash impairment loss was recorded during the three months ended March 31, 2007.
Our fiscal year 2006 analysis indicated that the net book value of our European franchise business approximated their fair value. The fiscal
year 2006 analysis indicated that the net book value of our beauty school business approximated their fair value. The fair value of our North
American salons and hair restoration centers exceeded their carrying amounts.
Long
-Lived Assets, Excluding Goodwill
We assess the impairment of long-lived assets annually or when events or changes in circumstances indicate that the carrying value of the
assets or the asset grouping may not be recoverable. Our impairment analysis is performed on a salon by salon basis. Factors considered in
deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations,
significant economic or geographic trends, and significant changes or planned changes in our use of the assets. Recoverability of assets that will
continue to be used in our operations is measured by comparing the carrying amount of the asset to the related total estimated future net cash
flows. If an asset's carrying value is not recoverable through those cash flows, the asset grouping is considered to be impaired. The impairment is
measured by the difference between the assets' carrying amount and their fair value, based on the best information available, including market
prices or discounted cash flow analysis.
Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows
in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvement of the assets, changes
in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying amounts of long-
lived assets are
assessed, these factors could cause us to realize material impairment charges.
During fiscal years 2008, 2007 and 2006, $10.5, $6.8, and $8.4 million ($6.4, $4.5 and $5.4 million net of tax, respectively) of impairment
was recorded within depreciation and amortization in the Consolidated Statement of Operations. In July 2008, we approved a plan to close up to
160 underperforming company-owned salons in fiscal year 2009. We also evaluated the appropriateness of the remaining useful lives of its
affected property and equipment and whether a change to the depreciation charge was warranted. Impairment charges are included in
depreciation related to company-owned salons in the Consolidated Statement of Operations.
Purchase Price Allocation
We make numerous acquisitions. The purchase prices are allocated to assets acquired, including identifiable intangible assets, and liabilities
assumed based on their estimated fair values at the dates of acquisition. Fair value is estimated based on the amount for which the asset or
liability could be bought or sold in a current transaction between willing parties. For our acquisitions, the majority of the purchase price that is
not allocated to identifiable assets, or liabilities assumed, is accounted for as residual goodwill rather than identifiable intangible assets. This
stems from the value associated with the walk-in customer base of the acquired salons, the value of which is not recorded as an identifiable
intangible asset under current accounting guidance and the limited value of the acquired leased site and customer preference associated with the
acquired hair salon brand. Residual goodwill further represents our opportunity to strategically combine the acquired business with our existing
structure to serve a greater number of customers through our expansion strategies. Identifiable intangible assets purchased in fiscal year 2008,
2007 and 2006 acquisitions totaled $16.1, $4.5, and $17.3 million,
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