Jamba Juice 2008 Annual Report Download - page 53

Table of Contents
Management of the Company determines when redemption is determined to be remote based upon historical redemption patterns. Management of the Company
has evaluated the redemption patterns associated with its jambacards and has determined that redemptions become remote after three years of inactivity. As a
result, the Company recognized $1.5 million of income from jambacard breakage in fiscal 2007 and $0.3 million in fiscal 2006. Jambacard breakage income
is recorded as a reduction in other operating expenses in our consolidated statements of operations.
Jamba Juice Company has sold the jambacard since November of 2002. The jambacard works as a reloadable gift or debit card. At time of the initial
load, in an amount between $5 and $500, the Company records an obligation that is reflected as jambacard liability on the consolidated balance sheets. The
Company relieves the liability and records the related revenue at the time a customer redeems any part of the amount on the card. The card does not have any
expiration provisions and is not refundable, except as otherwise required by law.
Self-Insurance Reserves
The Company uses a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for workers’ compensation,
healthcare benefits, general liability, property insurance, director and officers’ liability insurance, and vehicle liability. Liabilities associated with the risks
that the Company retains are estimated in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial
assumptions. The estimated accruals for these liabilities are based on statistical analyses of historical industry data as well as our actual historical trends. If
actual claims experience differs from our assumptions, historical trends, and estimates, changes in our insurance reserves would impact the expense recorded
in our consolidated statements of operations.
Income Taxes
The provision for income taxes is determined in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. Under this method,
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 basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment date. In establishing deferred income tax assets and liabilities, management
of the Company makes judgments and interpretations based on enacted tax laws and published tax guidance applicable to the Company’s operations. The
Company records deferred tax assets and liabilities and evaluates the need for valuation allowances to reduce deferred tax assets to estimated realizable
amounts. Changes in the Company’s valuation of the deferred tax assets or changes in the income tax provision may affect its annual effective income tax rate.
In July 2006, the FASB issued Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes . FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financials in accordance with SFAS No. 109 . FIN No. 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This
pronouncement also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Effective January 10, 2007, the Company adopted the provisions of FIN No. 48 and the provisions of FIN No. 48 have been applied to all income tax
positions commencing from that date. There was no effect on beginning retained earnings of applying the provisions of FIN No. 48 in the consolidated balance
sheets as of January 10, 2007. The Company classifies estimated interest and penalties related to the underpayment of income taxes as a component of income
taxes in the accompanying consolidated statements of operations.
Prior to fiscal 2007, the Company determined its tax contingencies in accordance with SFAS No. 5, Accounting for Contingencies. The Company
recorded estimated tax liabilities to the extent the contingencies were probable and could be reasonably estimated.
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