Papa Johns 2000 Annual Report Download - page 51

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2. Significant Accounting Policies (continued)
Long-Lived and Intangible Assets
The recoverability of long-lived and intangible assets is evaluated annually at an operating unit level basis
(e.g. an individual restaurant) when impairment indicators exist. We consider several indicators in
assessing impairment including historical financial performance, operating trends as well as management's
future operating plans. If impairment indicators exist, we evaluate whether impairment exists on the basis
of undiscounted expected future cash flows before interest for the expected remaining useful life of the
operating unit. Recorded values that are not expected to be recovered through undiscounted future cash
flows are written down to current fair value, which is generally determined from estimated discounted
future net cash flows (assets held for use) or net realizable value (assets held for sale).
Intangible assets principally represent costs in excess of net assets of companies acquired (i.e., goodwill).
Goodwill is amortized on a straight-line basis ranging from 15 to 25 years. Accumulated amortization was
$6.2 million at December 31, 2000 and $3.6 million at December 26, 1999 (see Note 4).
Systems Development Costs
We defer certain systems development and related costs which meet established criteria. Amounts
deferred are amortized principally over periods not exceeding five years beginning in the month subsequent
to completion of the related systems project. Total costs deferred were approximately $2.3 million in 2000,
$1.4 million in 1999, and $1.2 million in 1998.
Advertising and Related Costs
Advertising and related costs include the costs of Company-owned restaurant activities such as mail
coupons, door hangers and promotional items and contributions to the Papa John’ s Marketing Fund, Inc.
(the “Marketing Fund”) and local market cooperative advertising funds. Contributions by Company-owned
and franchised restaurants to the Marketing Fund and the cooperative advertising funds are based on an
established percentage of monthly restaurant revenues. The Marketing Fund is responsible for developing
and conducting marketing and advertising for the Papa John’ s system. The local market cooperative
advertising funds are responsible for developing and conducting advertising activities in a specific market,
including the placement of electronic and print materials developed by the Marketing Fund. We recognize
Company-owned restaurant contributions to the Marketing Fund and to those local market cooperative
advertising funds deemed to be controlled by us (collectively, the “Controlled Funds”), and funds advanced
to the Marketing Fund as loans (see Note 7), as advertising and related costs at the time the Controlled
Funds actually incur such expenses.
Foreign Currency Translation
The local currency is the functional currency for our foreign subsidiary, Perfect Pizza. Earnings are
translated into U.S. dollars using monthly average exchange rates, while balance sheet accounts are
translated using year-end exchange rates. The resulting translation adjustments are included as a
component of accumulated other comprehensive income.