Cracker Barrel 2010 Annual Report Download - page 49

grants accrue dividends and their fair value is equal to the
market price of the Company’s stock at the date of the grant.
Share-based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as
expense over the requisite service period. e Company’s
policy is to recognize compensation cost for awards with
only service conditions and a graded vesting schedule on a
straight-line basis over the requisite service period for the
entire award. Additionally, the Company’s policy is to issue
new shares of common stock to satisfy exercises of share-
based compensation awards.
Income taxes – Employer tax credits for FICA taxes paid
on employee tip income and other employer tax credits are
accounted for by the ow-through method. Deferred income
taxes reect the net tax eects of temporary dierences
between the carrying amounts of assets and liabilities for
nancial reporting purposes and the amounts used for
income tax purposes. In 2008, the Company adopted new
accounting guidance for uncertain tax positions. is
accounting guidance prescribes a recognition threshold and
measurement aribute for the nancial statement recogni-
tion and measurement of a tax position taken or expected to
be taken in a tax return. e Company recognizes (or
derecognizes) a tax position taken or expected to be taken in
a tax return in the nancial statements when it is more likely
than not (i.e., a likelihood of more than y percent) that the
position would be sustained (or not sustained) upon
examination by tax authorities. A recognized tax position is
then measured at the largest amount of benet that is greater
than y percent likely of being realized upon ultimate
selement. e Company recognizes, net of tax, interest and
estimated penalties related to uncertain tax positions in its
provision for income taxes. e cumulative eect of adopting
this accounting guidance resulted in a net increase of $2,898
to the Company’s beginning 2008 retained earnings. See
Note 14 for additional information regarding income taxes.
Net income per share – Basic consolidated net income
per share is computed by dividing consolidated net income
to common shareholders by the weighted average number
of common shares outstanding for the reporting period.
Diluted consolidated net income per share reects the
potential dilution that could occur if securities, options or
other contracts to issue common stock were exercised or
converted into common stock and is based upon the
weighted average number of common and common equiva-
lent shares outstanding during the year. Common equivalent
shares related to stock options and nonvested stock and stock
awards issued by the Company are calculated using the
treasury stock method. Outstanding employee and director
stock options and nonvested stock and stock awards issued
by the Company represent the only dilutive eects on diluted
consolidated net income per share. See Note 16.
Use of estimates – Management of the Company has
made certain estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contin-
gent liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenues and expenses
during the reporting periods to prepare these Consolidated
Financial Statements in conformity with GAAP. Manage-
ment believes that such estimates have been based on
reasonable and supportable assumptions and that the resulting
estimates are reasonable for use in the preparation of the
Consolidated Financial Statements. Actual results, however,
could dier from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Codication
On September 15, 2009, the Company adopted the Account-
ing Standards Codication (“ASC”) as issued by the
Financial Accounting Standards Board (“FASB”). e ASC
is the single source of authoritative nongovernmental 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 the Company’s
consolidated nancial statements.
Fair Value
On August 1, 2009, the rst day of 2010, the Company
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
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