Jack In The Box 2010 Annual Report Download - page 50

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Table of Contents


While we will continue to honor all gift cards presented for payment, we may determine the likelihood of redemption to be remote for
certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent we determine there
is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as
a reduction to selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Income recognized on unredeemed gift card balances was $0.7 million in fiscal 2010 and 2009 and $1.0 million in fiscal 2008.
Pre-opening costs associated with the opening of a new restaurant consist primarily of employee training costs and are expensed as
incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Restaurant closure costs — All costs associated with exit or disposal activities are recognized when they are incurred. Restaurant
closure costs, which are included in impairment and other charges, net in the accompanying consolidated statements of earnings,
consist of future lease commitments, net of anticipated sublease rentals, and expected ancillary costs.
Self-insurance — We are self-insured for a portion of our workers’ compensation, general liability, automotive, and employee
medical and dental claims. We utilize a paid-loss plan for our workers’ compensation, general liability and automotive programs,
which have predetermined loss limits per occurrence and in the aggregate. We establish our insurance liability and reserves using
independent actuarial estimates of expected losses for determining reported claims and as the basis for estimating claims incurred but
not reported.
Advertising costs — We administer marketing funds which included contractual contributions of approximately 5% and 1% of
sales at all franchise and company-operated Jack in the Box and Qdoba restaurants, respectively. We record contributions from
franchisees as a liability included in accrued expenses in the accompanying consolidated balance sheets until such funds are
expended. As the contributions to the marketing funds are designated for advertising, we act as an agent for the franchisees with
regard to these contributions. Therefore, we do not reflect franchisee contributions to the funds in our consolidated statements of
earnings or cash flows.
Production costs of commercials, programming and other marketing activities are charged to the marketing funds when the
advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred. Total
contributions and other marketing expenses, which are included in selling, general, and administrative expenses in the
accompanying consolidated statements of earnings, were $89.8 million, $100.1 million and $106.9 million in 2010, 2009 and
2008, respectively.
Share-based compensation We account for our share-based compensation as required by the FASB authoritative guidance on
stock compensationwhich generally requires, among other things, that all employee share-based compensation be measured using a
fair value method and that the resulting compensation cost be recognized in the financial statements.
Compensation expense for our share-based compensation awards is generally recognized on a straight-line basis during the service
period of the respective grant. Certain awards accelerate vesting upon the recipient’s retirement from the Company. In these cases, for
awards granted prior to October 3, 2005, we recognize compensation costs over the service period and accelerate any remaining
unrecognized compensation when the employee retires. For awards granted after October 2, 2005, we recognize compensation costs
over the shorter of the vesting period or the period from the date of grant to the date the employee becomes eligible to retire. For awards
granted prior to October 3, 2005, had we recognized compensation cost over the shorter of the vesting period or the period from the
date of grant to becoming retirement eligible, compensation costs recognized would not have been materially different.
F-10