Cracker Barrel 2005 Annual Report Download - page 46

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44
UNREDEEMED GIFT CARDS AND CERTIFICATES
Unredeemed gift cards and certificates represent a
liability of the Company related to unearned income
and are recorded at their expected redemption value.
The Company makes estimates of the ultimate unre-
deemed gift cards and certificates in the period of
the original sale for those states that exempt gift cards
and certificates from their escheat laws and in the
period that gift cards and certificates are remitted to
the state for other states and reduces its liability
and records revenue accordingly. These estimates are
determined based on redemption history and trends.
Changes in redemption behavior or management’s
judgments regarding redemption trends in the future
may produce materially different amounts of deferred
revenue to be reported. If gift cards and certificates
that have been removed from the liability are later
redeemed, the Company recognizes revenue and
reduces the liability as it would with any redemption.
Additionally, the initial reduction to the liability
would be reversed to offset the redemption. If gift
cards and certificates that have been remitted to a
state are later redeemed, the Company will request the
previously remitted cash back from the state. At
that time the Company will increase its liability for
gift cards and certificates to offset the reduction
to this same liability when the card was redeemed.
LEGAL PROCEEDINGS
In addition to the litigation discussed in Note 10 to
the Company’s Consolidated Financial Statements in
the Annual Report, the Company and its subsidiaries
are parties to other legal proceedings incidental to
their business. In the opinion of management, based
upon information currently available, the ultimate
liability with respect to these other actions will not
materially affect the Company’s Consolidated
Financial Statements.