Einstein Bros 2013 Annual Report Download - page 47

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
found in the market place for debt with the same remaining maturities (a level 2 input).
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid instruments with original maturities of three months or less when
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.
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.
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 (including 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 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. In either case, the Company’ s policy requires consistency when calculating the depreciation period, in classifying the lease and in
computing straight-line rent expense. 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:
Store and manufacturing equipment 5 years
Furniture and fixtures 5 years
Office and computer equipment 3 - 7 years
Vehicles 5 years
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has determined that the economic useful life for leasehold improvements on new restaurants should be the shorter of 10 years
or the life of the lease, which is typically 10 years. The Company also determined that the economic useful lives of our restaurant upgrades should
be the shorter of 5 years or the life of the lease. However, as the Company approves restaurants to be upgraded, it simultaneously reviews the lease,
and typically only upgrades those locations that have a lease with a renewal option and reasonable assurance such lease will be renewed.
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