Significant Accounting Policies (Policies)

9 Months Ended

Sep. 25, 2011

Noncontrolling Interests

Noncontrolling Interests

The Consolidation topic of the Accounting Standards Codification (“ASC”) requires all entities to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements, but separate from the equity of the parent company. The Consolidation topic further requires that consolidated net income be reported at amounts attributable to the parent and the noncontrolling interest, rather than expensing the income attributable to the noncontrolling interest holder. Additionally, disclosures are required to clearly identify and distinguish between the interests of the parent company and the interests of the noncontrolling owners, including a disclosure on the face of the consolidated statements for income attributable to the noncontrolling interest holder.

Papa John’s had two joint venture arrangements as of September 25, 2011 and September 26, 2010, which were as follows:

	Restaurants		Restaurants						Noncontrolling
	as of		as of		Restaurant	Papa John's			Interest
	Sept. 25, 2011		Sept. 26, 2010		Locations	Ownership *			Ownership *
Star Papa, LP		75		75	Texas		51	%		49	%
Colonel's Limited, LLC		52		52	Maryland and Virginia		70	%		30	%
*The ownership percentages were the same for both the 2011 and 2010 periods presented in the accompanying consolidated financial statements.

The pre-tax income attributable to the joint ventures for the three and nine months ended September 25, 2011 and September 26, 2010 was as follows:

	Three Months Ended				Nine Months Ended
	Sept. 25,		Sept. 26,		Sept. 25,		Sept. 26,
(In thousands)	2011		2010		2011		2010
Papa John's International, Inc.	$	1,377	$	1,146	$	4,693	$	4,240
Noncontrolling interests		817		672		2,868		2,672
Total pre-tax income	$	2,194	$	1,818	$	7,561	$	6,912

The noncontrolling interest holders’ equity in the joint venture arrangements totaled $8.2 million as of September 25, 2011 and $8.5 million as of December 26, 2010.

Deferred Income Tax Assets and Tax Reserves

Deferred Income Tax Assets and Tax Reserves

We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. Discrete items are recorded in the quarter in which they occur.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date changes. As a result, our effective tax rate may fluctuate. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of September 25, 2011, we had a net deferred tax asset balance of $3.2 million. We have not provided a valuation allowance for the deferred tax assets since we believe it is more likely than not that future earnings will be sufficient to ensure the realization of the net deferred tax assets for federal and state purposes.

Certain tax authorities periodically audit the Company. We provide reserves for potential exposures. We evaluate these issues on a quarterly basis to adjust for events, such as court rulings or audit settlements, which may impact our ultimate payment for such exposures.

New Accounting Pronouncements

New Accounting Pronouncements

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income: Presentation of Comprehensive Income.  In accordance with the new guidance, an entity will no longer be permitted to record comprehensive income in its Consolidated Statements of Stockholders’ Equity. Instead, entities will be required to present components of comprehensive income in either one continuous financial statement with two sections, net income and other comprehensive income, or in two separate but consecutive statements.  This guidance will be required beginning with our first quarter of fiscal 2012. We do not expect the adoption of this ASU to have any impact on our operating results.
 

Intangibles – Goodwill and Other

In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other. The amendments in this update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. This guidance will be required beginning with our first quarter of fiscal 2012. We do not expect the adoption of this ASU to have a material impact on our operating results.

Reclassification of Hawaii, Alaska and Canada

Reclassification of Hawaii, Alaska and Canada

In 2011, we realigned management responsibility and financial reporting for Hawaii, Alaska and Canada from our International business segment to our Domestic franchising segment in order to better leverage existing infrastructure and systems. As a result, we renamed the Domestic franchising segment “North America franchising” in the first quarter of 2011. Certain prior year amounts have been reclassified in our Consolidated Statements of Income and in our segment information to conform to the current year presentation.

Subsequent Events

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission in this Form 10-Q. There were no subsequent events that required recognition or disclosure.