Baskin Robbins 2013 Annual Report Download - page 69

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-59-
(c) Accounting estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the use of estimates, judgments,
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent
assets and liabilities at the date of the financial statements and for the period then ended. Significant estimates are made in the
calculations and assessments of the following: (a) allowance for doubtful accounts and notes receivables, (b) impairment of
tangible and intangible assets, (c) income taxes, (d) real estate reserves, (e) lease accounting estimates, (f) gift certificate
breakage, and (g) contingencies. Estimates are based on historical experience, current conditions, and various other
assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments
about the carrying values of assets and liabilities when they are not readily apparent from other sources. We adjust such
estimates and assumptions when facts and circumstances dictate. Actual results may differ from these estimates under different
assumptions or conditions. Illiquid credit markets and volatile equity and foreign currency markets have combined to increase
the uncertainty inherent in such estimates and assumptions.
(d) Cash and cash equivalents and restricted cash
The Company continually monitors its positions with, and the credit quality of, the financial institutions in which it maintains
its deposits and investments. As of December 28, 2013 and December 29, 2012, we maintained balances in various cash
accounts in excess of federally insured limits. All highly liquid instruments purchased with an original maturity of three months
or less are considered cash equivalents.
Cash held related to the advertising funds and the Company’s gift card/certificate programs are classified as unrestricted cash as
there are no legal restrictions on the use of these funds; however, the Company intends to use these funds solely to support the
advertising funds and gift card/certificate programs rather than to fund operations. Total cash balances related to the advertising
funds and gift card/certificate programs as of December 28, 2013 and December 29, 2012 were $134.5 million and $125.4
million, respectively.
(e) Fair value of financial instruments
The carrying amounts of accounts receivable, notes and other receivables, assets and liabilities related to the advertising funds,
accounts payable, and other current liabilities approximate fair value because of their short-term nature. For long-term
receivables, we review the creditworthiness of the counterparty on a quarterly basis, and adjust the carrying value as necessary.
We believe the carrying value of long-term receivables of $5.3 million and $5.8 million as of December 28, 2013 and
December 29, 2012, respectively, approximates fair value.
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value
hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and
liabilities and lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making
fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within
which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value
measurement.