NASDAQ_TXRH_2019

Texas Roadhouse, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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

F-10

balances over 120 days and a specified amount are reviewed individually for collectability. Account balances are
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) 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(g) for further discussion of leases.

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 $27.9 million, $29.7 million and $25.8 million for the years ended
December 31, 2019, December 25, 2018 and December 26, 2017, respectively. These costs are included in other
operating costs in our consolidated statements of income and comprehensive income.

(g) Leases

We lease land and/or buildings for the majority of our restaurants under non-cancelable lease agreements which
have initial terms and one or more option periods. In addition, certain of these leases contain pre-determined fixed
escalations of the minimum rent over the lease term.

Beginning in 2019 with the adoption of ASC 842, Leases, we recognize operating lease right-of-use assets and
operating lease liabilities for these leases based on the present value of the lease payments over the lease term. In
addition, for those leases with fixed escalations, we recognize the related rent expense on a straight-line basis over the
lease term. See note 8 for further discussion of leases.

(h) 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 reporting unit
level, which we define as the individual restaurant level. These tests are performed on an annual basis, or sooner if an
event or other circumstance indicates that goodwill may be impaired. Prior to 2019, this annual assessment occurred at
the end of each fiscal year. In 2019, we changed the annual assessment date to the beginning of our fourth quarter. As
our primary indicator of impairment is a decrease in cash flows and because we have a significant number of reporting
units with goodwill, an earlier evaluation date will allow us to more timely identify potential impairments. This change