Cracker Barrel 2013 Annual Report Download - page 39

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Gain or loss is recognized upon disposal of property and
equipment. e asset and related accumulated depreciation
and amortization amounts are removed from the accounts.
Maintenance and repairs, including the replacement of
minor items, are charged to expense and major additions to
property and equipment are capitalized.
Impairment of long-lived assets – e Company assesses
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 ows expected to be generated
by the asset. If the total expected future cash ows are
less than the carrying value 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.
See Note 9 for additional information on the Company’s
impairment of long-lived assets.
Derivative instruments and hedging activities – The
Company is exposed to market risk, such as changes in
interest rates and commodity prices. e Company has interest
rate risk relative to its outstanding borrowings, which bear
interest at the Company’s election either at the prime rate or
LIBOR plus a percentage point spread based on certain
specied nancial ratios under its credit facility (see Note 5).
e Company’s policy has been to manage interest cost
using a mix of xed and variable rate debt. To manage this
risk in a cost ecient manner, the Company uses derivative
instruments, specically interest rate swaps.
Companies may elect whether or not to oset related assets
and liabilities and report the net amount on their nancial
statements if the right of seto exists. Under a master neing
agreement, the Company has the legal right to oset the
amounts owed to the Company against amounts owed by the
Company under a derivative instrument that exists between
the Company and a counterparty. When the Company is
engaged in more than one outstanding derivative transaction
with the same counterparty and also has a legally enforceable
master neing agreement with that counterparty, its credit
risk exposure is based on the net exposure under the master
neing agreement. If, on a net basis, the Company owes
the counterparty, the Company regards its credit exposure to
the counterparty as being zero.
e Company does not hold or use derivative instruments
for trading purposes. e Company also does not have any
derivatives not designated as hedging instruments and has
not designated any non-derivatives as hedging instruments.
See Note 6 for additional information on the Company’s
derivative and hedging activities.
Segment reporting – Operating segments are components
of an enterprise about which separate nancial information
is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance. Utilizing these criteria, the Company
manages its business on the basis of one reportable operating
segment (see Note 8 for additional information regarding
segment reporting).
Revenue recognition – e Company records revenue
from the sale of products as they are sold. e Company
provides for estimated returns based on return history and
sales levels. e Company’s policy is to present sales in
the Consolidated Statements of Income on a net presentation
basis aer deducting sales tax.
Unredeemed gi cards and certicates – Unredeemed
gi cards and certicates represent a liability of the Company
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
or gi certicates are sold. For those states that exempt gi
cards and certicates from their escheat laws, the Company
makes estimates of the ultimate unredeemed (“breakage”)
gi cards and certicates in the period of the original sale
and amortizes this breakage over the redemption period that
other gi cards and certicates historically have been
redeemed by reducing its liability and recording revenue