NASDAQ_TXRH_2018

Texas Roadhouse, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share data)

F-8

charged off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote.

(e) Inventories

Inventories, consisting principally of food, beverages and supplies, are valued at the lower of cost (first - in,
first - out) or net realizable value.

(f) Pre - opening Expenses

Pre - opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening
of a new restaurant and are comprised principally of opening team and training team compensation and benefits, travel
expenses, rent, food, beverage and other initial supplies and expenses.

(g) Property and Equipment

Property and equipment are stated at cost. Expenditures for major renewals and betterments are capitalized while
expenditures for maintenance and repairs are expensed as incurred. Depreciation is computed on property and
equipment, including assets located on leased properties, over the shorter of the estimated useful lives of the related
assets or the underlying lease term using the straight - line method. In most cases, assets on leased properties are
depreciated over a period of time which includes both the initial term of the lease and one or more option periods. See
note 2(p) for further discussion of leases and leasehold improvements.

The estimated useful lives are:

Land improvements ................................................. 10 - 25 years

Buildings and leasehold improvements .................................. 10 - 25 years

Furniture, fixtures and equipment ...................................... 3 - 10 years

The cost of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of
authorized liquor licenses are capitalized as indefinite-lived assets and included in Property and equipment, net.

Repairs and maintenance expense amounted to $29.7 million, $25.8 million and $22.4 million for the years ended
December 25, 2018, December 26, 2017 and December 27, 2016, respectively. These costs are included in other
operating costs in our consolidated statements of income and comprehensive income.

(h) Impairment of Goodwill

Goodwill represents the excess of cost over fair value of assets of businesses acquired. In accordance with the
provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350,
Intangibles – Goodwill and Other ("ASC 350"), we perform tests to assess potential impairments at the end of each
fiscal year or during the year if an event or other circumstance indicates that goodwill may be impaired. Our assessment
is performed at the reporting unit level, which is at the individual restaurant level. In the first step of the review process,
we compare the estimated fair value of the restaurant with its carrying value, including goodwill. If the estimated fair
value of the restaurant exceeds its carrying amount, no further analysis is needed. If the estimated fair value of the
restaurant is less than its carrying amount, the second step of the review process requires the calculation of the implied
fair value of the goodwill by allocating the estimated fair value of the restaurant to all of the assets and liabilities of the
restaurant as if it had been acquired in a business combination. The residual fair value after this allocation is the implied
fair value of the reporting unit goodwill. If the carrying value of the goodwill associated with the restaurant exceeds the
implied fair value of the goodwill, an impairment loss is recognized for that excess amount.

The valuation approaches used to determine fair value are subject to key judgments and assumptions that are
sensitive to change such as judgments and assumptions about appropriate revenue growth rates, operating margins,