Cracker Barrel 2011 Annual Report Download - page 25

We consider the following accounting estimates to be
most critical in understanding the judgments that are
involved in preparing our Consolidated Financial Statements:
r *NQBJSNFOU PG -POH-JWFE "TTFUT BOE 1SPWJTJPO GPS
Asset Dispositions
r *OTVSBODF 3FTFSWFT
r 3FUBJM *OWFOUPSZ 7BMVBUJPO
r 5BY 1SPWJTJPO
r 4IBSF#BTFE $PNQFOTBUJPO
r 6OSFEFFNFE (Jě $BSET
r -FHBM 1SPDFFEJOHT
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 of an asset may not be recoverable. Recoverability
of assets is measured by comparing the carrying value of the
asset to the undiscounted future cash flows expected to be
generated by the asset. If the total expected future cash flows
are less than the carrying amount of the asset, the carrying
value is wrien down, for an asset to be held and used, to the
estimated fair value or, for an asset to be disposed of, to the
fair value, net of estimated costs of disposal. Any 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 and future cash flows are
affected 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 final disposition occurs.
We have not made any material changes in our methodology
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 assumptions
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 flows and fair
values of long-lived assets, we may be exposed to losses that
could be material.
In 2011, 2010 and 2009, we incurred impairment charges
related to our stores. In 2011 and 2009, we also incurred
impairment charges related to corporate properties. For a
more detailed discussion of these costs see the sub-section
entitled “Impairment and Store Dispositions, Net” under the
section above 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 $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 offered 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. efirst program is fully insured
and as such has no liability for unpaid claims. e second
program is self-insured. For our calendar 2009 plan, benefits
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 and 2011 plans, benefits 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
23
B)LQDQFLDOLQGG 30