Cracker Barrel 2009 Annual Report Download - page 49

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values of long-lived assets, we may be exposed to losses
that could be material.
In 2009, we incurred impairment charges related to
one of our Cracker Barrel stores and three corporate
properties. In 2008, we incurred impairment charges
resulting from the closing of two Cracker Barrel stores. We
recorded no impairment losses during 2007. For a more
detailed discussion of these costs see the sub-section
entitled “Impairment and Store Closing Costs” under the
section entitled “Results of Operations” presented earlier
in the MD&A.
Insurance Reserves
We self-insure a significant portion of our expected
workers’ compensation, general liability and health
insurance programs. We purchase insurance for individual
workers’ compensation claims that exceed either $250,
$500 or $1,000 depending on the state in which the
claim originates. We purchase insurance for individual
general liability claims that exceed $500. Prior to January
1, 2009, we did not purchase such insurance for our
group health program, but did limit our benefits for any
individual (employee or dependents) in the program to
not more than $1,000 lifetime, and, in certain cases, to
not more than $100 in any given plan year. Beginning
January 1, 2009, we split our group health program into
two programs. The first program is self-insured and limits
our offered benefits for any individual (employee or
dependents) to not more than $100 in any given plan
year, and, in certain cases, to not more than $15 in any
given plan year. The second program is fully insured and
as such has no liability for unpaid claims. We record a
liability for the self-insured portion of our group health
program for all unpaid claims based upon a loss
development analysis derived from actual group health
claims payment experience provided by our third party
administrator.
We record a liability for workers’ compensation
and general liability for all unresolved claims and for an
actuarially determined estimate of incurred but not
reported claims at the anticipated cost to us based upon
an actuarially determined reserve as of the end of our
third quarter and adjust it by the actuarially determined
losses and actual claims payments for the fourth quarter.
Those reserves and losses are determined actuarially from
a range of possible outcomes within which no given
estimate is more likely than any other estimate. As such,
we record the actuarially determined losses at the low
end of that range and discount them to present value
using a risk-free interest rate based on actuarially
projected timing of payments. We also monitor actual
claims development, including incurrence or settlement of
individual large claims during the interim period between
actuarial studies as another means of estimating the
adequacy of our reserves.
Our accounting policies regarding insurance reserves
include certain actuarial assumptions and management
judgments regarding economic conditions, the frequency
and severity of claims and claim development history and
settlement practices. We have not made any material
changes in the accounting methodology used to establish
our insurance reserves during the past three fiscal years
and do not believe there is a reasonable likelihood that
there will be a material change in the estimates or
assumptions used to calculate the insurance reserves.
However, changes in these actuarial assumptions or
management judgments in the future may produce
materially different amounts of expense that would be
reported under these insurance programs.
Inventory Reserves
Cost of goods sold includes the cost of retail merchandise
sold at our stores utilizing the retail inventory
accounting method. Inventory valuation provisions are
included for retail inventory obsolescence and retail
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