Jack In The Box 2015 Annual Report Download - page 56

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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 $1.0 million, $0.8 million and $0.7 million in fiscal 2015, 2014 and 2013, respectively.
Pre-opening costs associated with the opening of a new restaurant consist primarily of employee training costs and are expensed as incurred and 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 and losses (gains) on the sale of company-operated restaurants 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, employee medical and dental, and automotive 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 (undiscounted) and reserves using independent actuarial estimates of expected losses for determining
reported claims and as the basis for estimating claims incurred but not reported. As of September 27, 2015 and September 28, 2014, our estimated liability for
general liability and workers’ compensation claims exceeded our self-insurance retention limits by $25.8 million and $24.6 million, respectively, which we
expect our insurance providers to pay on our behalf in accordance with the contractual terms of our insurance policies.
Advertising costs — We administer marketing funds which include contractual contributions. In fiscal 2015, the marketing funds at franchise and company-
operated restaurants were generally 5% and 2% of gross revenues at Jack in the Box and Qdoba restaurants, respectively, and in both fiscal 2014 and 2013
the marketing funds were approximately 5% and 1% of gross revenues at Jack in the Box and Qdoba restaurants, respectively. We record contributions from
franchisees as a liability included in accrued liabilities in the accompanying consolidated balance sheets until such funds are expended. The contributions to
the marketing funds are designated for marketing initiatives and advertising and 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, are included in
selling, general, and administrative expenses in the accompanying consolidated statements of earnings. The following table provides a summary of
advertising costs related to company-operated restaurants in each fiscal year (in thousands):



Jack in the Box
$ 41,895
$ 42,349
$ 46,739
Qdoba
17,687
18,215
16,123
Total
$ 59,582
$ 60,564
$ 62,862
Share-based compensation — We account for our share-based compensation under 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 over the shorter of the vesting period or the period from the date of grant to the date the employee becomes eligible to retire.
Income taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases, as well as tax loss and credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. We recognize interest and, when applicable, penalties related to unrecognized tax benefits as a component of our income tax provision.
Authoritative guidance issued by the FASB prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is
recognized. The minimum threshold is defined as a tax position that is more likely than not to be
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