Cracker Barrel 2015 Annual Report Download - page 33

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Gain or lossis recognized upon disposal of propertyand
equipment. e asset andrelated accumulated depreciation
andamortization amounts are removed from the accounts.
Maintenance and repairs, including the replacement of
minor items,are charged to expense andmajoradditions to
propertyand equipment are capitalized.
Impairment of long-lived assets –e Companyassesses
the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying value of
an asset maynot be recoverable. Recoverability of assets is
measured by comparing the carrying value of the asset to the
undiscounted future cash owsexpected to be generated
by the asset.If the total expected futurecash owsare 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,
netof estimated costs of disposal. Any lossresulting from
impairment is recognized by a chargeto income.
Derivativeinstrumentsand hedging activities–
e Companyis exposed to market risk, such as changes in
interest rates andcommodity prices. e Companyhas
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 percentagepoint 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 variablerate debt. To manage this riskin
a cost ecient manner, the Company uses derivative instru-
ments, specically interest rate swaps.
Companies may elect whether or not to oset related
assets andliabilities and report the net amount on their
nancial statements if the right of setoexists. Under a master
neing agreement, the Companyhas the legalright to
oset the amounts owed to the Companyagainst amounts
owed by the Company undera derivative instrument
that exists between the Companyand a counterparty.When
the Companyis engagedin more than one outstanding
derivative transaction with the samecounterparty andalso
hasa legally enforceablemasterneing agreement with that
counterparty,its creditrisk exposure is based on the net
exposure under the masterneing agreement. If, on a net basis,
the Companyowes the counterparty,the Companyregards
its creditexposure to the counterparty as being zero.
e Companydoes not hold or use derivative instruments
for trading purposes.e Companyalso does not haveany
derivatives not designatedas hedging instrumentsand has not
designatedany non-derivativesas hedging instruments. See
Note 6 for additional information on the Company’s derivative
andhedging activities.
Segment reporting– Operating segments are components
of an enterprise about which separate nancial information
is availablethat is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance. Utilizing these criteria, the Company
managesits 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.
Unredeemedgicardsand certicates – Unredeemed gi
cards andcerti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 aresold. For those states that exempt gicards
andcerticates from their escheatlaws,the Companymakes
estimatesof the ultimate unredeemed (“breakage”) gicards
andcerticates in the period of the original sale and amor-
tizes this breakageover the redemption period that other gi
cards andcerticates historically have been redeemed by