Cracker Barrel 2006 Annual Report Download - page 38

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36
share-based compensation arrangements that is expected
to be recognized over a weighted-average period of
2.10 years. No restricted stock grants vested during 2006.
Rental Costs
In October 2005, the Financial Accounting Standards
Board (the “FASB”) issued Staff Position No. FAS 13-1,
“Accounting for Rental Costs Incurred during a
Construction Period” (“FSP No. 13-1”). FSP No. 13-1
states that rental costs associated with ground or
building operating leases that are incurred during a
construction period shall be recognized as rental
expense in income from continuing operations as
opposed to capitalizing such rental costs. Although the
provisions of FSP No. 13-1 are effective for the first
reporting period beginning after December 15, 2005, the
Company has chosen to early adopt this guidance
in its first quarter of 2006. The early adoption of FSP
No. 13-1 did not affect the Company’s consolidated
results of operations or financial position since this
treatment did not differ from the Company’s then-
existing accounting policy.
Amortization Period of Leasehold Improvements
In September 2005, the FASB issued Emerging Issues
Task Force (“EITF”) No. 05-6, “Determining the
Amortization Period for Leasehold Improvements
Purchased after Lease Inception or Acquired in a
Business Combination” (“EITF 05-6”). EITF 05-6 states
that leasehold improvements acquired in a business
combination should be amortized over the shorter of
the useful life of the assets or a term that includes
required lease periods and renewals that are deemed to
be reasonably assured at the date of acquisition.
EITF 05-6 further states that leasehold improvements
placed in service significantly after and not contem-
plated at or near the beginning of a lease term should
be amortized over the shorter of the useful life of the
assets or a term that includes required lease periods
and renewals that are deemed to be reasonably assured
at the date the leasehold improvements are purchased.
This consensus does not apply to preexisting leasehold
improvements. The provisions of EITF 05-6 are
effective for leasehold improvements that are purchased
or acquired in reporting periods beginning after
September 28, 2005, with early adoption permitted.
The Company adopted this guidance in the first quarter
of 2006. The early adoption of EITF 05-6 did not
affect the Company’s results of operations or financial
position since this treatment did not differ from the
Company’s then-existing accounting policy.
Taxes Collected from Customers
In June 2006, a consensus was reached by the FASB on
EITF Issue No. 06-3, “How Taxes Collected from
Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is,
Gross versus Net Presentation)” (“EITF 06-3”). As
permitted by the provisions of EITF 06-3, the Company’s
policy is to present sales in the income statement
on a net presentation basis after deducting sales tax.
Recent Accounting Pronouncements Not Yet Adopted
In June 2006, the FASB issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (“FIN 48”),
which clarifies the accounting for uncertainty in income
taxes recognized in financial statements in accordance
with FASB No. 109, “Accounting for Income Taxes”.
FIN 48 prescribes a recognition threshold and measure-
ment attribute for the financial statement recognition
and measurement of a tax position taken or expected
to be taken in a tax return. The provisions of FIN 48
are effective for fiscal years beginning after December
15, 2006, with the cumulative effect of the change
in accounting principle recorded as an adjustment to
opening retained earnings. The Company is currently
evaluating the impact of adopting FIN 48 and cannot
yet determine the impact of its adoption in the first
quarter of 2008.
Quantitative and Qualitative Disclosures
about Market Risk
Interest Rate Risk.
The Company is subject to market
risk exposure related to changes in interest rates. As of
October 2, 2006, the Company has a $723,000 Term
Loan B and has in place a $200,000 Delayed-Draw Term
Loan facility, which mature on April 27, 2013 and a
$250,000 Revolving Credit Facility, which matures April
27, 2011. The Term Loan B and the facilities bear inter-
est, at the Company’s election, either at the prime rate
or a percentage point spread from LIBOR based on
certain financial ratios set forth in the loan agreement.