Papa Johns 2008 Annual Report Download - page 78

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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.
Discontinued Operations
The Company previously operated and franchised pizza delivery and carryout restaurants under the
trademark “Perfect Pizza” in the United Kingdom. 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 3). 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 $754,000 in 2008, $608,000 in 2007 and $415,000 in 2006.
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 28, 2008, we had a net deferred income tax asset balance of $24.6 million, of which
approximately $15.1 million relates to BIBP’s net operating loss carryforward. We have not provided a
valuation allowance for the deferred income tax assets associated with our domestic operations 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.