Financial Review 2004 Our accounting policies regarding land, buildings, and equipment,  including leasehold improvements, include our judgments regard-  ing the estimated useful lives of these assets, the residual values to  which the assets are depreciated or amortized, and the determina-  tion as to what constitutes enhancing the value of or increasing the  life of existing assets. These judgments and estimates may produce  materially different amounts of reported depreciation and amorti-  zation expense if different assumptions were used. As discussed fur-  ther below, these judgments may also impact our need to recognize  an impairment charge on the carrying amount of these assets as the  cash flows associated with the assets are realized. Impairment of Long-Lived Assets Land, buildings, and equipment and certain other assets, includ-  ing capitalized software costs and liquor licenses, are reviewed  for impairment whenever events or changes in circumstances  indicate that the carrying amount of an asset may not be recover-  able. Recoverability of assets to be held and used is measured by  a comparison of the carrying amount of the assets to the future  undiscounted net cash flows expected to be generated by the assets.  Identifiable cash flows are measured at the lowest level for which  they are largely independent of the cash flows of other groups  of assets and liabilities, generally at the restaurant level. If these  assets are determined to be impaired, the impairment recognized  is measured by the amount by which the carrying amount of the  assets exceeds their fair value. Fair value is generally determined  based on appraisals or sales prices of comparable assets. Restaurant  sites and certain other assets to be disposed of are reported at the  lower of their carrying amount or fair value, less estimated costs  to sell. Restaurant sites and certain other assets to be disposed of  are included in assets held for disposal when certain criteria are  met. These criteria include the requirement that the likelihood of  disposing of these assets within one year is probable. Those assets  whose disposal is not probable within one year remain in land,  buildings, and equipment until their disposal is probable within  one year. The judgments we make related to the expected useful lives of long-  lived assets and our ability to realize undiscounted cash flows in  excess of the carrying amounts of these assets are affected by factors  s uch as the ongoing maintenance and improvements of the assets,  Our estimates are based on the best available information at the  time that we prepare the provision. We generally file our annual  income tax returns several months after our fiscal year-end. Income  tax returns are subject to audit by federal, state, and local govern-  ments, generally years after the returns are filed. These returns could  be subject to material adjustments or differing interpretations of the  tax laws. We estimate certain components of our provision for income  taxes. These estimates include, among other items, depreciation  and amortization expense allowable for tax purposes, allowable  tax credits for items such as taxes paid on reported employee tip  income, effective rates for state  and local income taxes, and the  tax deductibility of certain other items. Income Taxes Our accounting policies regarding self-insurance programs  include our judgments and independent actuarial assumptions  regarding economic conditions, the frequency or severity of  claims and claim development patterns, and claim reserve,  management, and settlement practices. Unanticipated changes  in these factors may produce materially different amounts of  reported expense under these programs. We self-insure a significant portion of expected losses under our  workers' compensation, employee medical, and general liability  programs. Accrued liabilities have been recorded based on our esti-  mates of the ultimate costs to settle incurred claims, both reported  and not yet reported. Self-Insurance Accruals changes in economic conditions, and changes in usage or operating  performance. As we assess the ongoing expected cash flows and car-  rying amounts of our long-lived assets, significant adverse changes  in these factors could cause us to realize a m aterial impairment  charge. In fiscal 2004, we recognized asset impairment charges of  $37 million ($22 million after-tax) fo r the closing of six Bahama  Breeze restaurants and the write-down of four other Baham a  Breeze restaurants, one Olive Garden restaurant, and one Red  Lobster restaurant based on an evaluation of expected cash flows. Darden Restaurants 27 