Supercuts 2012 Annual Report Download - page 90

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
calculated liability amount is reviewed for reasonableness based on reserve adequacy ranges for historical periods by testing prior reserve
levels against actual expenses to date.
Although the Company does not expect the amounts ultimately paid to differ significantly from the estimates, self-insurance accruals
could be affected if future claims experience differs significantly from the historical trends and actuarial assumptions. For fiscal year 2012, the
Company recorded an increase in expense from changes in estimates related to prior year open policy periods related to continuing operations
of $0.7 million. For fiscal year 2011, the Company recorded an increase in expense from changes in estimates related to prior year open policy
periods related to continuing operations of $1.4 million. For fiscal year 2010, the Company recorded a decrease in expense from changes in
estimates related to prior year open policy periods related to continuing operations of $1.7 million. A 10.0 percent change in the self-insurance
reserve would affect (loss) income from continuing operations before income taxes and equity in (loss) income of affiliated companies by $4.8,
$4.6, and $4.5 million for the three years ended June 30, 2012, 2011 and 2010, respectively. The Company updates loss projections twice each
year and adjusts its recorded liability to reflect the current projections. The updated loss projections consider new claims and developments
associated with existing claims for each open policy period. As certain claims can take years to settle, the Company has multiple policy periods
open at any point in time.
As the workers' compensation accrual is the majority of the self-insurance accrual, below is a rollforward of the activity within the
Company's workers' compensation self-insurance accrual:
As of June 30, 2012, the Company had $15.5 and $32.5 million recorded in current liabilities and noncurrent liabilities, respectively,
related to the Company's self-insurance accruals, which includes the workers' compensation self-insurance accrual. As of June 30, 2011, the
Company had $14.7 and $30.9 million recorded in current liabilities and noncurrent liabilities, respectively, related to the Company's self-
insurance accruals, which includes the workers' compensation self-insurance accrual.
Goodwill:
Goodwill is tested for impairment annually or at the time of a triggering event. In evaluating whether goodwill is impaired, the Company
compares the carrying value of each reporting unit, including goodwill, to the estimated fair value of the reporting unit. The carrying value of
each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit, including allocation of shared or
corporate balances among reporting units. Allocations are generally based on the number of salons in each reporting unit as a percent of total
company-owned salons.
87
For the Years Ended June 30,
2012 2011 2010
(Dollars in thousands)
Beginning balance
$
32,994
$
30,082
$
31,505
Provision for incurred losses
14,133
13,993
14,739
Prior year actuarial loss development
1,221
2,231
35
Claim payments
(14,140
)
(12,584
)
(14,867
)
Other, net
415
(728
)
(1,330
)
Ending balance
$
34,623
$
32,994
$
30,082