Supercuts 2008 Annual Report Download - page 77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
the Company. In such cases, the Company will include the renewal option period along with the original lease term in the determination of
appropriate estimated useful lives.
The Company capitalizes both internal and external costs of developing or obtaining computer software for internal use. Costs incurred to
develop internal-use software during the application development stage are capitalized, while data conversion, training and maintenance costs
associated with internal-use software are expensed as incurred. At June 30, 2008 and 2007, the net book value of capitalized software costs was
$41.0 and $35.0 million, respectively. Amortization expense related to capitalized software was $8.3, $8.8, and $8.1 million in fiscal years 2008,
2007, and 2006, respectively, which has been determined based on an estimated useful life of five or seven years.
Expenditures for maintenance and repairs and minor renewals and betterments which do not improve or extend the life of the respective
assets are expensed. All other expenditures for renewals and betterments are capitalized. The assets and related depreciation and amortization
accounts are adjusted for property retirements and disposals with the resulting gain or loss included in operating income. Fully depreciated or
amortized assets remain in the accounts until retired from service.
Investments:
The Company has equity investments in securities of other privately held entities. The Company accounts for these investments under the
cost method or the equity method of accounting, as appropriate. The valuation of investments accounted for under the cost method considers all
available financial information related to the investee. If an unrealized loss for any investment is considered to be other-than-temporary, the loss
will be recognized in the Consolidated Statement of Operations in the period the determination is made. Investments accounted for under the
equity method are recorded at the amount of the Company's investment and adjusted each period for the Company's share of the investee's
income or loss. Investments are reviewed for changes in circumstance or the occurrence of events that suggest the Company's investment may
not be recoverable.
The Company recognized an impairment loss during fiscal year 2006 of $4.3 million related to its interest in a privately held entity, which
was acquired during fiscal year 2005 through the acquisition of preferred stock. This investment was accounted for under the cost method. The
impairment charge was included in Other, net (other non-operating expense) in the Consolidated Statement of Operations and reduced the
Company's investment balance to zero.
Goodwill:
Goodwill is tested for impairment annually or at the time of a triggering event in accordance with the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets . Fair values are estimated based on the Company's best estimate of the expected present value of future
cash flows and compared with the corresponding carrying value of the reporting unit, including goodwill. Where available and as appropriate
comparative market multiples are used to corroborate the results of the present value method. The Company considers its various concepts to be
reporting units when it tests for goodwill impairment because that is where the Company believes goodwill resides. The Company's policy is to
perform its annual goodwill impairment test during its third quarter of each fiscal year ending June 30.
During the three months ended March 31 of fiscal years 2008, 2007, and 2006, the Company performed its annual goodwill impairment
analysis on its reporting units. Based on its testing, a
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