Papa Johns 2012 Annual Report Download - page 69

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63
2. Significant Accounting Policies (continued)
Foreign Currency Translation
The local currency is the functional currency for our foreign subsidiaries located in the United Kingdom,
Mexico and China. Earnings and losses are translated into U.S. dollars using monthly average exchange
rates, while assets and liabilities are translated using year-end exchange rates. The resulting translation
adjustments are included as a component of accumulated other comprehensive income (loss) net of
income taxes.
Stock-Based Compensation
Compensation expense for equity grants is estimated on the grant date, net of projected forfeitures. Stock
options are valued using a Black-Scholes option pricing model. Our specific assumptions for estimating
the fair value of options are included in Note 19. Restricted stock is valued based on the market price of
the Company’s shares on the date of grant.
Fair Value Measurements and Disclosures
Fair value is determined based on the price that would be received to sell the asset or paid to transfer the
liability to a market participant. Fair value is a market-based measurement, not an entity-specific
measurement.
The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of
the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market
data.
Level 3: Unobservable inputs that are not corroborated by market data.
Our financial assets and liabilities that were measured at fair value on a recurring basis as of December
30, 2012 and December 25, 2011 are as follows:
Carrying
(In thousands) Value Level 1 Level 2 Level 3
December 30, 2012
Financial assets:
Cash surrender value of life insurance policies * 13,551$ 13,551$ -$ -$
Financial liabilities:
Interest rate swap 104 - 104 -
December 25, 2011
Financial assets:
Cash surrender value of life insurance policies * 11,387$ 11,387$ -$ -$
Interest rate swap 11 - 11 -
* Represents life insurance policies held in our non-qualified deferred compensation plan.
Fair Value Measurements