Cracker Barrel 2010 Annual Report Download - page 32

duration of supply contracts, sometimes simultaneously. We
enter into supply contracts for certain of our products in an
eort to minimize volatility of supply and pricing. In many
cases, or over the longer term, we believe we will be able to
pass through some or much of the increased commodity costs
by adjusting our menu pricing. From time to time, competi-
tive circumstances, or judgments about consumer acceptance
of price increases, may limit menu price exibility, and in
those circumstances, increases in commodity prices can result
in lower margins, as happened to us in 2008.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Codication
On September 15, 2009, we adopted the Accounting
Standards Codication (“ASC”) as issued by the Financial
Accounting Standards Board (“FASB”). e ASC is the single
source of authoritative nongovernmental accounting
principles generally accepted in the United States of America
(“GAAP”), except for rules and interpretive releases of the
SEC, which are sources of authoritative GAAP for SEC
registrants. e adoption did not have an impact on our
consolidated nancial statements.
Fair Value
On August 1, 2009, the rst day of 2010, we adopted, on a
prospective basis, new accounting guidance as issued by the
FASB for certain nonnancial assets and liabilities that are
recorded or disclosed at fair value on a nonrecurring basis,
such as nonnancial long-lived asset groups measured at fair
value for an impairment assessment. e adoption did not
have an impact on our consolidated nancial statements. See
Note 3 to the accompanying Consolidated Financial
Statements for further information related to our assets and
liabilities measured at fair value on a nonrecurring basis.
CRITICAL ACCOUNTING ESTIMATES
We prepare our Consolidated Financial Statements in
conformity with GAAP. e preparation of these nancial
statements requires us to make estimates and assumptions
about future events and apply judgments that aect the
reported amounts of assets, liabilities, revenue, expenses and
related disclosures. We base our estimates and judgments on
historical experience, current trends, outside advice from
parties believed to be experts in such maers and on various
other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
However, because future events and their eects cannot be
determined with certainty, actual results could dier from
those assumptions and estimates, and such dierences could
be material.
Our signicant accounting policies are discussed in Note 2
to the Consolidated Financial Statements. Judgments and
uncertainties aecting the application of those policies may
result in materially dierent amounts being reported under
dierent conditions or using dierent assumptions. Critical
accounting estimates are those that:
• managementbelievesarebothmostimportanttothe
portrayal of our nancial condition and operating results and
• requiremanagement’smostdicult,subjectiveorcomplex
judgments, oen as a result of the need to make estimates
about the eect of maers that are inherently uncertain.
We consider the following accounting estimates to be most
critical in understanding the judgments that are involved in
preparing our Consolidated Financial Statements.
• ImpairmentofLong-LivedAssetsandProvisionforAsset
Dispositions
• InsuranceReserves
• InventoryValuation
• TaxProvision
• Share-BasedCompensation
• UnredeemedGiCards
• LegalProceedings
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