Supercuts 2012 Annual Report Download - page 93

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-Lived Asset Impairment Assessments, Excluding Goodwill:
The Company reviews long-lived assets for impairment at the salon level annually or if events or circumstances indicate that the carrying
value of such assets may not be recoverable. The Company's test for impairment of property and equipment is performed at a salon level, as
this is the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the assets that does not
recover the carrying value of the related salon assets. When the sum of a salon's undiscounted estimated future cash flow is zero or negative,
impairment is measured as the full carrying value of the related salon's equipment and leasehold improvements. When the sum of a salon's
undiscounted cash flows is greater than zero but less than the carrying value of the related salon's equipment and leasehold improvements, a
discounted cash flow analysis is performed to estimate the fair value of the salon assets and impairment is measured as the difference between
the carrying value of the salon assets and the estimated fair value. The fair value estimate is based on the best information available, including
market data.
As a result of the Company's annual impairment analysis of long-lived assets, the following impairment charges were recognized during
fiscal years 2012, 2011, and 2010, respectively, related primarily to the carrying value of certain salons' property and equipment within our
North American, International, and Hair Restoration Centers segments:
The Company also evaluated the appropriateness of the remaining useful lives of its non-impaired property and equipment and whether a
change to the depreciation charge was warranted. Impairment charges for continuing operations are included in depreciation related to
company-owned salons in the Consolidated Statement of Operations.
Deferred Rent and Rent Expense:
The Company leases most salon and hair restoration center locations under operating leases. Rent expense is recognized on a straight-line
basis over the lease term. Tenant improvement allowances funded by landlord incentives, rent holidays, and rent escalation clauses which
provide for scheduled rent increases during the lease term or for rental payments commencing at a date other than the date of initial occupancy
are recorded in the Consolidated Statements of Operations on a straight-line basis over the lease term (including one renewal option period if
renewal is reasonably assured based on the imposition of an economic penalty for failure to exercise the renewal option). The difference
between the rent due under the stated periods of the lease compared to that of the straight-line basis is recorded as deferred rent within other
noncurrent liabilities in the Consolidated Balance Sheet.
90
For the Years Ended June 30,
2012 2011 2010
(Dollars in thousands)
North American salons
$
6,066
$
6,115
$
6,253
International salons
570
394
175
Hair restoration centers
—
172
—
Total
$
6,636
$
6,681
$
6,428