Jamba Juice 2007 Annual Report Download - page 91

Table of Contents
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records the employee costs as other operating expense and the reimbursement from the area developers as franchise and other revenue. Due to uncertainty of
collection of the reimbursement from these two area developers, the revenue is recognized on a cash basis.
Advertising Costs —Advertising costs are expensed as incurred and were $1.5 million, $5.1 million, $4.8 million and $4.8 million, in the 22 Week
Period and fiscal 2006, 2005, and 2004, respectively, and are classified as store operating expenses. Jamba Juice Company also receives advertising
contributions from its franchisees. These contributions are a contractual obligation of the franchisee and are recorded as an offset to advertising expense and
were $1.5 million, $1.6 million, $1.2 million, and $1.0 million for the 22 Week Period and fiscal 2006, 2005, and 2004, respectively.
Store Pre-opening Costs —Costs incurred in connection with start-up and promotion of new store openings, as well as rent from possession date to
store opening date are expensed as incurred.
Fair Value of Financial Instruments—The carrying value of cash and cash equivalents, notes and accounts receivable, and accounts payable
approximates fair value. The carrying value of debt approximates the estimated fair value due to floating interest rates on the debt.
Comprehensive Income—Comprehensive income is defined as the change in equity during a period from transactions and other events, excluding
changes resulting from investments from owners and distributions to owners. Comprehensive income equals net income for all periods presented.
Income Taxes—Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in Jamba Juice Company’s consolidated financial statements or tax returns. In
estimating future tax consequences, Jamba Juice Company generally considers all expected future events other than changes in the tax law or rates. A valuation
allowance is recorded when it is deemed more likely than not that a deferred tax asset will be not realized.
Employee Stock Options—Stock options for a fixed number of shares are granted to certain employees and directors with an exercise price equal to or
greater than the fair market value of Jamba Juice Company’s common stock at the date of grant. Prior to June 28, 2006, Jamba Juice Company accounted for
employee stock options in accordance with the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, 
. Under APB Opinion No. 25, Jamba Juice Company did not recognize compensation expense related to employee stock options,
as options were not granted below market price on the grant date.
On June 28, 2006, Jamba Juice Company adopted the provisions of SFAS No. 123 (revised 2004) (“SFAS 123R”), , requiring
the measurement and recognition of all share-based compensation under the fair value method. Using the prospective transition method, which requires Jamba
Juice Company to continue to apply the minimum value method of measuring equity share options and similar instruments under the provisions of APB
Opinion No. 25 and its related interpretive guidance to equity share options and similar instruments issued prior to June 28, 2006, and to apply the
provisions of SFAS 123R prospectively to new awards and to awards modified, repurchased, or canceled after June 27, 2006.
In accordance with the prospective transition method, Jamba Juice Company’s consolidated financial statements for years beginning prior to June 28,
2006 have not been restated to reflect, and do not include, the impact of SFAS 123R. SFAS 123R requires companies to estimate the fair value of share-based
payment awards
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