The Company conducted an impairment test for its property and equipment and determined that there was an impairment at one of its stores, which was under-performing, in the amount of $327 for the 13 week and 26 week periods ended December 29, 2012 ($21 for the 13 week and 26 week periods ended December 24, 2011). The recoverable amount of the cash generating unit ("CGU") was estimated based on value-in-use calculations as this was determined to be higher than fair value less costs to sell. These calculations use cash flow projections based on actual performance during the past 12 months which are then extrapolated over each CGU's remaining lease term and then discounted using an estimated discount rate. The key assumptions for the value-in-use calculations include discount rates, growth rates and expected cash flows. Management estimates discount rates using pre-tax rates that reflect current market assessment of the time value of money and the risks specific to the CGUs. Changes in revenues and direct costs are based on past experience and expectations of future changes in the market.
The pre-tax discount rate used to calculate the value-in-use range is 11% and is dependent on the specific risks in relation to the CGU. The discount rate is derived from retail industry comparable post-tax weighted average cost of capital.
If management's cash flow estimate were to decrease by 10% or if the discount rate were to increase by 100 basis points, the impairment for the 13 week and 26 week periods ended December 29, 2012 would remain unchanged.
6. Computer Software:
26 Weeks Ended ---------------------------------------------- December 29, 2012 December 24, 2011 ----------------------------------------------CostBeginning of period $ 3,994 $ 4,041Additions 38 16Disposals - - ----------------------------------------------End of period $ 4,032 $ 4,057 ---------------------------------------------- ----------------------------------------------Accumulated amortizationBeginning of period $ 3,268 $ 2,987Amortization for the period 178 179Impairment losses - - ----------------------------------------------End of period $ 3,446 $ 3,166 ---------------------------------------------- ----------------------------------------------Net carrying valueEnd of period $ 586 $ 891Beginning of period $ 726 $ 1,054
7. Bank Facilities:
The Company has an operating credit facility for working capital and for general corporate purposes to a maximum amount of $25 million that is committed until June 27, 2014 and bears interest at prime plus 0.75%. Standby fees of 0.50% are paid on a quarterly basis for any unused portion of the operating credit facility. The operating credit facility is subject to certain covenants and other limitations that, if breached, could cause a default and may result in a requirement for immediate repayment of amounts outstanding. Security provided includes a security interest over all personal property of the Company's business and a mortgage over the land and building comprising the Company's head office/distribution facility.
