Supercuts 2011 Annual Report Download - page 94

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
As a result of the Company's annual impairment analysis of long-lived assets, the following impairment charges were recognized during
fiscal years 2011, 2010, and 2009, respectively, related primarily to the carrying value of certain salons' property and equipment within our
North American, International, and Hair Restoration Centers segments:
The International impairment charges in fiscal year 2009 included charges related to the Company's June 2009 plan to close up to 80
underperforming company-owned salons in the United Kingdom in fiscal year 2010. The Company also evaluated the appropriateness of the
remaining useful lives of its non-impaired property and equipment and whether a change to the depreciation charge was warranted. Impairment
charges for continuing operations are included in depreciation related to company-owned salons in the Consolidated Statement of Operations.
Deferred Rent and Rent Expense:
The Company leases most salon and hair restoration center locations under operating leases. Rent expense is recognized on a straight-line
basis over the lease term. Tenant improvement allowances funded by landlord incentives, rent holidays, and rent escalation clauses which
provide for scheduled rent increases during the lease term or for rental payments commencing at a date other than the date of initial occupancy
are recorded in the Consolidated Statements of Operations on a straight-line basis over the lease term (including one renewal option period if
renewal is reasonably assured based on the imposition of an economic penalty for failure to exercise the renewal option). The difference between
the rent due under the stated periods of the lease compared to that of the straight-line basis is recorded as deferred rent within other noncurrent
liabilities in the Consolidated Balance Sheet.
For purposes of recognizing incentives and minimum rental expenses on a straight-
line basis over the terms of the leases, the Company uses
the date that it obtains the legal right to use and control the leased space to begin amortization, which is generally when the Company enters the
space and begins to make improvements in preparation of intended use of the leased space.
Certain leases provide for contingent rents, which are determined as a percentage of revenues in excess of specified levels. The Company
records a contingent rent liability in accrued expenses on the Consolidated Balance Sheet, along with the corresponding rent expense in the
Consolidated Statement of Operations, when specified levels have been achieved or when management determines that achieving the specified
levels during the fiscal year is probable.
Revenue Recognition and Deferred Revenue:
Company-owned salon revenues and related cost of sales are recognized at the time of sale, as this is when the services have been provided
or, in the case of product revenues, delivery has occurred, and
90
For the Years Ended June 30,
2011 2010 2009
(Dollars in thousands
North American salons
$
6,115
$
6,253
$
4,309
International salons
394
175
5,892
Hair restoration centers
172
—
—
Total
$
6,681
$
6,428
$
10,201