Papa Johns 2007 Annual Report Download - page 75

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2. Significant Accounting Policies (continued)
Restaurant Closures
We recognize the costs associated with restaurant closures at the time such costs are actually incurred, as
required by SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, generally
expected to be at the time the closing occurs. During 2007, we incurred $1.4 million in charges
associated with restaurant closures. There were no significant restaurant closure charges recorded in
2006 and 2005.
Discontinued Operations
The Company sold its Perfect Pizza operations, consisting of the franchised units and related distribution
operations in March 2006, which were classified as discontinued (see Note 4). A business component
that either has been disposed of or is classified as held for sale is accounted for as a discontinued
operation if the cash flow of the component has been or will be eliminated from the ongoing operations
of the Company and the Company will no longer have any significant continuing involvement in the
business. The results of operations of the discontinued operations through the date of sale, including any
gain or loss on disposition, are aggregated and presented on a separate line in the income statement. Prior
to dispositions, the assets and liabilities of discontinued operations are aggregated and reported on
separate lines in the balance sheet. We have separately disclosed the operating and investing activities of
the cash flows attributable to our discontinued Perfect Pizza operations. There was not an impact on our
financing activities associated with the discontinued operations for the three years presented in the
statements of cash flows.
Deferred Costs
We defer certain systems development and related costs that meet established criteria. Amounts deferred,
which are included in property and equipment, 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 $608,000 in 2007, $415,000 in 2006 and $566,000 in 2005.
Deferred Income Tax Assets and Tax Reserves
We provide reserves for potential exposures when we consider it probable that a taxing authority may
take a sustainable position on a matter contrary to our filed position. We evaluate these issues on a
quarterly basis to adjust for events, such as court rulings or examination settlements that may impact our
ultimate payment for such exposures.
As of December 30, 2007, we had a net deferred income tax asset balance of $19.5 million, of which
approximately $11.3 million relates to BIBP’s net operating loss carryforward. We have not provided a
valuation allowance for the deferred income tax assets since we believe it is more likely than not that the
Company’s future earnings, including BIBP, will be sufficient to ensure the realization of the net
deferred income tax assets for federal and state purposes.