Notes to Consolidated Financial Statements (in thousands, except share and per share amounts) March 28, 2004, March 30, 2003 and March 31, 2002 Note A—Description and Organization of Business 4. Cash and Cash Equivalents 5. Impairment of Notes Receivable Note B—Summary of Significant Accounting Policies 1. Principles of Consolidation 2. Fiscal Year 3. Use of Estimates Nathan’s Famous, Inc. and subsidiaries (collectively the “Company” or “Nathan’s”) has historically operated or franchised a chain of retail fast food restaurants featuring the Nathan’s famous brand of all beef frankfurters, fresh crinkle-cut french fried potatoes and a variety of other menu offerings. Since fiscal 1998, the Company has supplemented the Nathan’s franchise program with the Nathan’s Branded Product Program, which enables foodservice retailers to sell some of Nathan’s proprietary products outside of the realm of a tradi- tional franchise relationship. During fiscal 2000, the Company acquired the intellectual property rights, including trademarks, recipes and franchise agreements of Roasters Corp. and Roasters Franchise Corp. (“Roasters”), the franchisor of Kenny Rogers Roasters. In addition, Nathan’s completed a merger with Miami Subs Corporation (“Miami Subs”) whereby it acquired the remaining 70% of Miami Subs common stock not previously owned by the Company. Miami Subs features a wide variety of lunch, dinner and snack foods, including hot and cold sandwiches and various ethnic foods. Roasters features home-style family foods based on a menu centered around wood-fire rotisserie chicken. The Company consid- ers its subsidiaries to be in the foodservice industry, and has pursued co-branding and co-hosting initiatives; accordingly, management has evaluated the Company as a single reporting unit. At March 28, 2004, the Company’s restaurant system, consisting of Nathan’s Famous, Kenny Rogers Roasters and Miami Subs restau- rants, included 7 Company-owned units concentrated in the New York metropolitan area, 338 franchised or licensed units, including 6 units operating pursuant to management agreements and approxi- mately 3,300 branded product points of sale under the Nathan’s Branded Product Program, located in 44 states, the District of Columbia, and 12 foreign countries.  The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All intercom- pany balances and transactions have been eliminated in consolidation. The Company’s fiscal year ends on the last Sunday in March, which results in a 52- or 53-week reporting period. The results of operations and cash flows for the fiscal years ended March 28, 2004 and March 30, 2003 are on the basis of 52-week reporting periods. The results of operations and cash flows for the fiscal year ended March 31, 2002 are on the basis of a 53-week reporting period. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure  of contingent assets and liabilities at the date of the financial state- ments and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management in preparing the consoli- dated financial statements include revenue recognition, the allowance for doubtful accounts, the allowance for impaired notes receivable, the self-insurance reserve and impairment charges on goodwill and long-lived assets.  The Company considers all highly liquid instruments pur- chased with an original maturity of three months or less to be cash equivalents. Cash restricted for untendered shares associated with the acquisition of Nathan’s in 1987 amounted to $83 at March 28, 2004 and March 30, 2003, respectively, and is included in cash and cash equivalents.  Nathan's follows the guidance in Statement of Financial Accounting Standards (“SFAS”) No. 114 (“SFAS No. 114”) “Account- ing by Creditors for Impairment of a Loan,” as amended. Pursuant to SFAS No. 114, a loan is impaired when, based on current informa- tion and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agree- ment. When evaluating a note for impairment, the factors considered include: (a) indications that the borrower is experiencing business problems such as operating losses, marginal working capital, inadequate cash flow or business interruptions, (b) loans secured by collateral that is not readily marketable, or (c) that are susceptible to deteriora- tion in realizable value. When determining impairment, manage- ment's assessment includes its intention to extend certain leases beyond the minimum lease term and the debtor's ability to meet its obligation over that extended term. In certain cases where Nathan's has determined that a loan has been impaired, it generally does not expect to extend or renew the underlying leases. Based on the Company's analysis, it has determined that there are notes that have incurred such an impairment. Following are summaries of impaired notes receivable and the allowance for impaired notes receivable: 2004 Annual Report  Nathan’s Famous, Inc. & Subsidiaries page seventeen March 28, March 30, 2004 2003 Total recorded investment in impaired  notes receivable $ 2,248 $ 2,598 Allowance for impaired notes receivable (2,051) (2,065) Recorded investment in impaired notes  receivable, net $ 197 $ 533 Allowance for impaired notes receivable  at beginning of the fiscal year $ 2,065 $ 640 Impairment charges on notes receivable 208 1,425 Impaired notes written off (222) — Allowance for impaired notes receivable  at end of the fiscal year $ 2,051 $ 2,065