Sprouts Farmers Market 2013 Annual Report Download - page 99

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Table of Contents
Store development costs, which include costs associated with the selection and procurement of real estate sites, are also
included in property and equipment. These costs are included in leasehold improvements and are amortized over the remaining
lease term of the successful sites with which they are associated. Certain project costs, including general site selection costs that
cannot be identified with a specific store location, are charged to direct store expenses in the accompanying consolidated
statements of operations.
Asset Retirement Obligations
The Company’s asset retirement obligations (“ARO”) are related to the Company’s commitment to return leased facilities to
the landlord in an agreed upon condition. This may require actions ranging from cleaning to removal of leasehold improvements.
The obligation is recorded as a liability with an offsetting capital asset at the inception of the lease term based upon the estimated
fair market value of costs to meet the commitment. The liability, included in other long-term liabilities in the consolidated balance
sheets, is accreted over time to the projected future value of the obligation. The ARO asset, included in property and equipment in
the consolidated balance sheets, is depreciated using the same useful life as the related property.
A reconciliation of the ARO liability is as follows:
Closed Store Reserve
The Company recognizes a reserve for future operating lease payments associated with facilities that are no longer being
utilized in its current operations. The reserve is recorded based on the present value of the remaining noncancelable lease
payments after the cease use date less an estimate of subtenant income. If subtenant income is expected to be higher than the
lease payments, no accrual is recorded. Lease payments included in the closed store reserve are expected to be paid over the
remaining terms of the respective leases. Adjustments to the closed store reserve relate primarily to changes in actual or estimated
subtenant income and actual lease payments from original estimates. Adjustments are made for changes in estimate in the period
in which the change becomes known considering timing of new information regarding the market, subleases or other lease updates.
Adjustments in the closed store reserves are recorded in “store closure and exit costs”
in the consolidated statements of operations.
Self-Insurance Reserves
The Company uses a combination of insurance and self-insurance programs to provide reserves for potential liabilities
associated with general liability, workers’ compensation and team member health benefits. Liabilities for self-
insurance reserves are
estimated through consideration of various factors, which include historical claims experience, demographic factors, severity factors
and other actuarial assumptions.
94
As Of
December 29,
2013
December 30,
2012
Beginning balance $
2,362
$
1,236
Additions for new facilities
54
132
ARO liability from business combination —
784
Accretion expense
322
237
Adjustments
(163
)
(27
)
Ending balance
$
2,575
$
2,362