Cracker Barrel 2010 Annual Report Download - page 36

performance goals are not met, no compensation cost is
ultimately recognized and, to the extent previously
recognized, compensation cost is reversed. During 2008,
based on our determination that the performance goals for
one executive’s nonvested stock grants would not be achieved,
we reversed approximately $3,508 of share-based compensa-
tion expense.
Other than the reversal of share-based compensation in
2008 for nonvested stock grants whose performance goals
would not be met, we have not made any material changes in
our estimates or assumptions used to determine share-based
compensation during the past three years. We do not believe
there is a reasonable likelihood that there will be a material
change in the future estimates or assumptions used to
determine share-based compensation expense. However, if
actual results are not consistent with our estimates or
assumptions, we may be exposed to changes in share-based
compensation expense that could be material.
Unredeemed Gi Cards
Unredeemed gi cards represent liabilities related to unearned
income and are recorded at their expected redemption value.
No revenue is recognized in connection with the point-of-sale
transaction when gi cards are sold. For those states that
exempt gi cards from their escheat laws, we make estimates of
the ultimate unredeemed (“breakage”) gi cards in the period
of the original sale and amortize this breakage over the
redemption period that other gi cards historically have been
redeemed by reducing the liability and recording revenue
accordingly. For those states that do not exempt gi cards from
their escheat laws, we record breakage in the period that gi
cards are remied to the state and reduce our liability accord-
ingly. Any amounts remied to states under escheat or similar
laws reduce our deferred revenue liability and have no
eect on revenue or expense while any amounts that we are
permied to retain are recorded as revenue. Changes in
redemption behavior or management’s judgments regarding
redemption trends in the future may produce materially
dierent amounts of deferred revenue to be reported.
We have not made any material changes in the methodol-
ogy used to record the deferred revenue liability for
unredeemed gi cards during the past three years and do not
believe there is a reasonable likelihood that there will be
material changes in the future estimates or assumptions used
to record this liability. However, if actual results are not
consistent with our estimates or assumptions, we may be
exposed to losses or gains that could be material.
Legal Proceedings
We are parties to various legal and regulatory proceedings and
claims incidental to our business. In the opinion of
management, however, based upon information currently
available, the ultimate liability with respect to these actions
will not materially aect our consolidated results of
operations or nancial position. We review outstanding
claims and proceedings internally and with external counsel
as necessary to assess probability of loss and for the ability to
estimate loss. ese assessments are re-evaluated each
quarter or as new information becomes available to determine
whether a reserve should be established or if any existing
reserve should be adjusted. e actual cost of resolving a
claim or proceeding ultimately may be substantially dierent
than the amount of the recorded reserve. In addition, because
it is not permissible under GAAP to establish a litigation
reserve until the loss is both probable and estimable, in some
cases there may be insucient time to establish a reserve
prior to the actual incurrence of the loss (upon verdict and
judgment at trial, for example, or in the case of a quickly
negotiated selement).
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