Buffalo Wild Wings 2009 Annual Report Download - page 69

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BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 27, 2009 and December 28, 2008
(Dollar amounts in thousands, except per-share amounts)
(h) Accounts Receivable
Accounts receivable – franchisees represents royalty receivables from our franchisees. Accounts receivable – other consists
primarily of contractually-determined receivables for leasehold improvements, credit cards, vendor allowances, and purchased interest
on investments. Cash flows related to accounts receivable are classified in net cash provided by operating activities in the
Consolidated Statements of Cash Flows.
(i) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Cash flows
related in inventory sales are classified in net cash provided by operating activities in the Consolidated Statements of Cash Flows.
We purchase products from a number of suppliers and believe there are alternative suppliers. We have minimum purchase
commitments from some of our vendors but the terms of the contracts and nature of the products are such that purchase requirements
do not create a market risk. The primary food product used by Company-owned and franchised restaurants is chicken wings. Chicken
wings are purchased by us at market prices. For fiscal 2009, 2008, and 2007, chicken wings were 25%, 21%, and 24% of restaurant
cost of sales, respectively.
(j) Property and Equipment
Property and equipment are recorded at cost. Leasehold improvements, which include the cost of improvements funded by
landlord incentives or allowances, are amortized using the straight-line method over the lesser of the term of the lease, without
consideration of renewal options, or the estimated useful lives of the assets, which typically range from five to ten years. Buildings are
depreciated using the straight-line method over the estimated useful life, which ranges from 10 to 20 years. Furniture and equipment
are depreciated using the straight-line method over the estimated useful lives of the assets, which range from two to eight years.
Maintenance and repairs are expensed as incurred. Upon retirement or disposal of assets, the cost and accumulated depreciation are
eliminated from the respective accounts and the related gains or losses are credited or charged to earnings.
We review property and equipment, along with other long-lived assets, quarterly to determine if triggering events have occurred
which would require a test to determine if the carrying value of these assets may not be recoverable based on estimated future
undiscounted cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is the individual
restaurant level. In determining future cash flows, significant estimates are made by us with respect to future operating results of each
restaurant over its remaining lease term. If such assets are considered impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is generally determined by estimated
discounted future cash flows.
(k) Goodwill and Other Assets
Goodwill represents the excess of cost over the fair value of identified net assets of businesses acquired. Goodwill and
indefinite-life purchased liquor licenses are subject to an annual impairment analysis. We identify potential impairments of goodwill
by comparing the carrying amount of a reporting unit, including goodwill, with its fair value, estimated using both an income
approach and a market approach. For these purposes, a reporting unit is defined as a geographic market. If the fair value of the market
exceeds the carrying amount, the assets are not impaired. If the carrying amount exceeds the fair value, this is an indication that
impairment may exist. We calculate the amount of the impairment by comparing the implied fair value of the assets and liabilities of
the reporting unit with the carrying amount. If the implied value of the asset is less than the carrying amount, impairment is recognized
for the difference. All goodwill was considered recoverable as of December 27, 2009.
Source: BUFFALO WILD WINGS INC, 10-K, February 26, 2010 Powered by Morningstar® Document Research℠