Cracker Barrel 2012 Annual Report Download - page 41

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liability and corresponding rent expense when it is probable
sales have been achieved in amounts in excess of the speci-
ed levels.
e liabilities under these leases are recognized on the
straight-line basis over the shorter of the useful life, with a
maximum of 35 years, or the related lease life. e Company
uses a lease life that generally begins on the date that the
Company becomes legally obligated under the lease,
including the rent holiday periods, and generally extends
through certain renewal periods that can be exercised at the
Company’s option, for which at the inception of the lease, it
is reasonably assured that the Company will exercise those
renewal options. is lease period is consistent with the
period over which leasehold improvements are amortized.
Advertising – e Company expenses the costs of
producing advertising the rst time the advertising takes
place. Other advertising costs are expensed as incurred.
Advertising expense for each of the three years was
as follows:
2012 2011 2010
Advertising expense $ 56,198 $ 48,889 $ 45,239
Share-based compensation – e Company’s share-based
compensation consists of nonvested stock, stock options and
performance-based market stock units (“MSU Grants”).
Share-based compensation is recorded in general and
administrative expenses in the Consolidated Statements of
Income. Share-based compensation expense is measured at
the grant date based on the fair value of the award. e
Company recognizes share-based compensation expense on
a straight-line basis over the requisite service period, which is
generally the award’s vesting period, or to the date on which
retirement eligibility is achieved, if shorter.
Certain nonvested stock awards and the Company’s MSU
Grants contain performance conditions. Compensation
expense for performance-based awards is recognized when it
is probable that the performance criteria will be met. If any
performance goals are not met, no compensation expense is
ultimately recognized and, to the extent previously recog-
nized, compensation expense is reversed.
If a share-based compensation award is modied aer the
grant date, incremental compensation expense is recognized
in an amount equal to the excess of the fair value of the
modied award over the fair value of the original award
immediately before the modication. Incremental compen-
sation expense for vested awards is recognized immediately.
For unvested awards, the sum of the incremental compensa-
tion expense and the remaining unrecognized compensation
expense for the original award on the modication date is
recognized over the modied service period.
Additionally, the Company’s policy is to issue new shares
of common stock to satisfy exercises of share-based compen-
sation awards.
Income taxes – e Company’s provision for income taxes
includes 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. e Company recognizes (or derecog-
nizes) 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. See Note 15 for additional
information regarding income taxes.
Comprehensive income – Comprehensive income
includes net income and the eective unrealized portion
of the changes in the fair value of the Company’s interest
rate swaps.
Discontinued operations – e Company classies the
results of operations of a closed store as a discontinued
operation when the operations and cash ows of the store
have been or will be eliminated from ongoing operations, the
Company no longer has any signicant continuing involve-
ment in the operations associated with the store aer closure
and the results are material to the Company’s consolidated