Cracker Barrel 2010 Annual Report Download - page 33

Management has reviewed these critical accounting
estimates and related disclosures with the Audit Commiee
of our Board of Directors.
Impairment of Long-Lived Assets and
Provision for Asset Dispositions
We assess the impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying
value may not be recoverable. Recoverability of assets is
measured by comparing the carrying value of the asset to the
undiscounted future cash ows expected to be generated by
the asset. If the total expected future cash ows are less than
the carrying amount of the asset, the carrying amount is
wrien down to the estimated fair value of an asset to be held
and used or the fair value, net of estimated costs of disposal, of
an asset to be disposed of, and a loss resulting from
impairment is recognized by a charge to income. Judgments
and estimates that we make related to the expected useful lives
of long-lived assets are aected by factors such as changes in
economic conditions and changes in operating performance.
e accuracy of such provisions can vary materially from
original estimates and management regularly monitors the
adequacy of the provisions until nal disposition occurs.
We have not made any material changes in our methodol-
ogy for assessing impairments during the past three years and
we do not believe that there is a reasonable likelihood that
there will be a material change in the estimates or assump-
tions used by us to assess impairment on long-lived assets.
However, if actual results are not consistent with our
estimates and assumptions used in estimating future cash
ows and fair values of long-lived assets, we may be exposed
to losses that could be material.
In 2010, 2009 and 2008, we incurred impairment charges
related to our stores. In 2009, we also incurred impairment
charges related to three corporate properties. For a more
detailed discussion of these costs see the sub-section entitled
“Impairment and Store Closing Charges” under the
section entitled “Results of Operations” presented earlier
in the MD&A.
Insurance Reserves
We self-insure a signicant portion of our expected workers’
compensation, general liability and health insurance
programs. We purchase insurance for individual workers’
compensation claims that exceed $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 oered benets 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. e rst program is fully insured
and as such has no liability for unpaid claims. e second
program is self-insured. For our calendar 2009 plan, benets
for any individual (employee or dependents) in the self-
insured program were limited to not more than $1,000
lifetime, $100 in any given plan year and, in certain cases, to
not more than $15 in any given plan year. For our calendar
2010 plan, benets for any individual (employee or
dependents) in the self-insured program are limited to not
more than $20 in any given plan year, and, in certain cases, to
not more than $8 in any given year. 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.
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. e 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
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