Jack In The Box 2008 Annual Report Download - page 54

Inventories are valued at the lower of cost or market on a first-in, first-out basis. Changes in inventories are
classified as operating activity in the consolidated statements of cash flows.
Assets held for sale typically represent the costs for new sites that we plan to sell and lease back when
construction is completed and existing sites that we plan to sell and lease back within the next year. Gains or losses
realized on sale-leaseback transactions are deferred and amortized to income over the lease terms. Assets held for
sale also includes the net book value of equipment we plan to sell to franchisees and assets expected to be sold upon
our disposition of Quick Stuff. Assets held for sale consisted of the following at each year-end:
Sept. 28,
2008 Sept. 30, 2007
Sites held for sale and leaseback .................................. $ 62,309 $39,821
Quick Stuff assets held for sale ................................... 49,656 —
Assets held for sale to franchisees ................................. 1,029 2,762
Assets held for sale ............................................ $112,994 $42,583
Property and equipment, at cost — Expenditures for new facilities and equipment, and those that substantially
increase the useful livesof the property, are capitalized. Facilities leased under capital leases are stated at the present
value of minimum lease payments at the beginning of the lease term, not to exceed fair value. Maintenance and
repairs are expensed as incurred. When properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are reflected in
results of operations.
Buildings, equipment, and leasehold improvements are generally depreciated using the straight-line method
based on the estimated useful lives of the assets, over the initial lease term for certain assets acquired in conjunction
with the lease commencement for leased properties, or the remaining lease term for certain assets acquired after the
commencement of the lease for leased properties. In certain situations, one or more option periods may be used in
determining the depreciable life of assets related to leased properties if we deem that an economic penalty would be
incurred otherwise. In either circumstance, our policy requires lease term consistency when calculating the
depreciation period, in classifying the lease and in computing straight-line rent expense. Building and leasehold
improvement assets are assigned lives that range from 3 to 35 years, and equipment assets are assigned lives that
range from 2 to 35 years.
Impairment of long-lived assets — We evaluate our long-lived assets, such as property and equipment, for
impairment whenever 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. Long-lived assets that are held for disposal are reported at the
lower of their carrying value or fair value, less estimated costs to sell.
Goodwill and intangible assets — Goodwill is the excess of the purchase price over the fair value of
identifiable net assets acquired. Intangible assets, net is comprised primarily of lease acquisition costs, acquired
franchise contract costs and our Qdoba trademark. Lease acquisition costs primarily represent the fair values of
acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line
basis over the remaining initial lease term, generally 18 years. Acquired franchise contract costs, which represent
the acquired value of franchise contracts, are amortized over the term of the franchise agreements, generally
10 years, based on the projected royalty revenue stream. Our trademark asset, recorded in connection with our
acquisition of Qdoba Restaurant Corporation in fiscal 2003, has an indefinite life and is not amortized.
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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)