Jack In The Box 2010 Annual Report Download - page 48

Table of Contents
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Changes in accounts and other receivables are classified as an operating activity in the consolidated statements of cash flows.
Inventories are valued at the lower of cost or market on a first-in, first-out basis. Changes in inventories are classified as an
operating activity in the consolidated statements of cash flows.
Assets held for sale typically represent the costs for new sites 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. Assets are not depreciated when classified as
held for sale. Assets held for sale consisted of the following at each year-end:
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Sites held for sale and leaseback $ 55,224 $ 99,612
Assets held for sale 4,673 -
$ 59,897 $ 99,612
Property and equipment, at cost — Expenditures for new facilities and equipment, and those that substantially increase the useful
lives of 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 three to 35 years, and equipment assets are assigned lives that range from two
to 35 years. Depreciation and amortization expense related to property and equipment was $101.0 million, $100.5 million and
$96.7 million in 2010, 2009 and 2008, respectively.
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 generally includes a restaurant-level analysis, except when we are actively selling a
group of restaurants in which case we perform our impairment evaluations at the group level. Impairment evaluations for individual
restaurants take 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. Impairment evaluations for a group of restaurants
takes into consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value
based on, among other considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of
restaurants subject to our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we
recognize an impairment loss by the amount which the carrying value of the assets exceeds fair value. 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
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