Jack In The Box 2010 Annual Report Download - page 31

Table of Contents
postretirement expense to decrease in fiscal 2011 principally due to the curtailment of our qualified plan which will be partially offset by a
decrease in our discount rate from 6.16% to 5.82%.
 — We are self-insured for a portion of our losses related to workers’ compensation, general liability, automotive, and
health benefits. 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.
 — Restaurant closing costs consist of future lease commitments, net of anticipated sublease rentals and
expected ancillary costs. We record a liability for the net present value of any remaining lease obligations, net of estimated sublease
income, at the date we cease using a property. Subsequent adjustments to the liability as a result of changes in estimates of sublease
income or lease cancellations are recorded in the period incurred. The estimates we make related to sublease income are subject to a high
degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other
factors.
We offer share-based compensation plans to attract, retain and motivate key officers, non-employee
directors and employees to work toward the financial success of the Company. Share-based compensation cost for our stock option grants
is estimated at the grant date based on the award’s fair-value as calculated by an option pricing model and is recognized as expense ratably
over the requisite service period. The option pricing models require various highly judgmental assumptions including volatility, forfeiture
rates and expected option life. If any of the assumptions used in the model change significantly, share-based compensation expense may
differ materially in the future from that recorded in the current period.
 — We also evaluate goodwill and non-amortizable intangible assets 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 2010, we reviewed the carrying value of our goodwill and indefinite life intangible assets and determined that no impairment existed
as of October 3, 2010.
 — 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 collectability 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.
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.
We estimate certain components of our provision for income taxes. These estimates include, among other items,
depreciation and amortization expense allowable for tax purposes, allowable tax credits, effective rates for state and local income taxes and
the tax deductibility of certain other items. We adjust our effective income tax rate as additional information on outcomes or events
becomes available. Our estimates are based on the best available information at the time that we prepare the income tax provision. We
generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal,
state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing
interpretations of the tax laws.
30