Jack In The Box 2008 Annual Report Download - page 37

Retirement Benefits — We sponsor pension and other retirement plans in various forms covering those
employees who meet certain eligibility requirements. Several statistical and other factors, which attempt to
anticipate future events, are used in calculating the expense and liability related to the plans, including assumptions
about the discount rate, expected return on plan assets and the rate of increase in compensation levels, as determined
by us using specified guidelines. In addition, our outside actuarial consultants also use certain statistical factors such
as turnover, retirement and mortality rates to estimate our future benefit obligations. The actuarial assumptions used
may differ materially from actual results due to changing market and economic conditions, higher or lower turnover
and retirement rates or longer or shorter life spans of participants. These differences may affect the amount of
pension expense we record.
Self Insurance — We are self-insured for a portion of our losses related to workers’ compensation, general
liability, automotive, medical and dental programs. In estimating our self-insurance accruals, we utilize
independent actuarial estimates of expected losses, which are based on statistical analysis of historical data.
These assumptions are closely monitored and adjusted when warranted by changing circumstances. Should a
greater amount of claims occur compared to what was estimated or medical costs increase beyond what was
expected, accruals might not be sufficient, and additional expense may be recorded.
Long-lived Assets — Property, equipment and certain other assets, including amortized intangible assets, are
reviewed for impairment when indicators of impairment are present. This review includes a restaurant-level
analysis that takes into consideration a restaurant’s operating cash flows, the period of time since a restaurant has
been opened or remodeled, refranchising expectations, and the maturity of the related market. When indicators of
impairment are present, we perform an impairment analysis on a restaurant-by-restaurant basis. If the sum of
undiscounted future cash flows is less than the net carrying value of the asset, we recognize an impairment loss by
the amount which the carrying value exceeds the fair value of the asset. Our estimates of future cash flows may
differ from actual cash flows due to, among other things, economic conditions or changes in operating performance.
Goodwill and Other Intangibles — We also evaluate goodwill and intangible assets not subject to amortization
annually or more frequently if indicators of impairment are present. If the determined fair values of these assets are
less than the related carrying amounts, an impairment loss is recognized. The methods we use to estimate fair value
include future cash flow assumptions, which may differ from actual cash flows due to, among other things,
economic conditions or changes in operating performance. During the fourth quarter of fiscal 2008, we reviewed the
carrying value of our goodwill and indefinite life intangible assets and determined that no impairment existed as of
September 28, 2008.
Allowances for Doubtful Accounts — Our trade receivables consist primarily of amounts due from franchisees
for rents on subleased sites, royalties and distribution sales. We continually monitor amounts due from franchisees
and maintain an allowance for doubtful accounts for estimated losses. This estimate is based on our assessment of
the collectibility of specific franchisee accounts, as well as a general allowance based on historical trends, the
financial condition of our franchisees, consideration of the general economy and the aging of such receivables. We
have good relationships with our franchisees and high collection rates; however, if the future financial condition of
our franchisees were to deteriorate, resulting in their inability to make specific required payments, we may be
required to increase the allowance for doubtful accounts.
Legal Accruals — The Company is subject to claims and lawsuits in the ordinary course of its business. A
determination of the amount accrued, if any, for these contingencies is made after analysis of each matter. We
continually evaluate such accruals and may increase or decrease accrued amounts, as we deem appropriate.
FUTURE APPLICATION OF ACCOUNTING PRINCIPLES
In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 clarifies the definition of
fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure
requirements. This statement applies under other accounting pronouncements that currently require or permit
fair value measurements and is effective for fiscal years beginning after November 15, 2007, and interim periods
within those years. However, the effective date of SFAS 157 as it relates to fair value measurement requirements for
nonfinancial assets and liabilities that are not remeasured at fair value on a recurring basis is deferred to fiscal years
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