Einstein Bros 2011 Annual Report Download - page 47

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
purchased. Amounts in-transit from credit card processors are also considered cash equivalents because they are both short-term and highly liquid
in nature and are typically converted to cash within three days of the sales transaction.
Restricted Cash
The Company’ s restricted cash consists of funds paid by franchisees that are earmarked as advertising fund contributions and for a deposit
required on the Company’ s corporate credit card.
Accounts Receivable
The majority of the Company’ s receivables are due from franchisees, licensees, distributors and trade customers. The Company determines
an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due,
previous loss and payment history, the customer’ s current ability to pay its obligation to the Company and the condition of the general economy
and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on
such receivables are credited to the allowance for doubtful accounts.
Inventories
Inventories, which consist of food, beverage, paper supplies and bagel ingredients, are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment and leasehold improvements are recorded at cost or, in the case of a business combination, at fair value.
Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using
the straight-line method over the shorter of their
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
useful lives or the non-cancelable lease term. In circumstances where failure to exercise a renewal option would result in the Company incurring an
economic penalty, those option periods are included when determining the depreciation period. Costs incurred to repair and maintain the
Company’ s facilities and equipment are expensed as incurred. The estimated useful lives used for financial statement purposes are:
Leasehold improvements 5 - 10 years
Store and manufacturing equipment 5 years
Furniture and fixtures 5 years
Office and computer equipment 3 years
Vehicles 5 years
Capitalization of Internal Development Costs
The Company capitalizes direct costs associated with the site acquisition and subsequent construction of a company-owned restaurant on that
site, including direct internal payroll and payroll-related costs. The Company only capitalizes those site-specific costs incurred subsequent to the
time that the site acquisition is considered probable. If the Company makes the determination that a site for which internal development costs have
been capitalized will not be subsequently acquired or developed, any previously capitalized internal development costs will be written off to
general and administrative expenses.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of long-lived
assets may not be recoverable. For the purpose of reviewing restaurant assets for indicators of potential impairment, assets are grouped together at
the market level. The Company manages its restaurants by market with significant common costs and promotional activities which are generally
not clearly identifiable with an individual restaurant’ s cash flows. Site specific indicators of impairment, if present, are also considered.
Recoverability of restaurant assets is measured by a comparison of the carrying amount of an individual restaurant’ s assets to the estimated
identifiable undiscounted future cash flows expected to be generated by those restaurant assets. If the carrying amount of an individual restaurant’ s
assets exceeds its estimated identifiable undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying
amount of the assets exceeds its fair value. Generally, a restaurant’ s identifiable future cash flows are discounted to estimate its fair value.