Note 1
Summary of Significant Accounting Policies

Operations and Principles of Consolidation
The accompanying consolidated financial statements include the operations of Darden Restaurants, Inc. and its wholly owned subsidiaries (Darden, the Company, we, us or our). We own and operate the Red Lobster®, Olive Garden®, Bahama Breeze®, Smokey Bones Barbeque & Grill® and Seasons 52® restaurant concepts located in the United States and Canada, with no franchising. We also license 42 restaurants in Japan. All significant intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year
Our fiscal year ends on the last Sunday in May. Fiscal 2006 and 2005 both consisted of 52 weeks of operation. Fiscal 2004 consisted of 53 weeks of operation.

Use of Estimates
We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us 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 statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents
Cash equivalents include highly liquid investments such as U.S. treasury bills, taxable municipal bonds and money market funds that have a maturity of three months or less. Amounts receivable from credit card companies are also considered cash equivalents because they are both short-term and highly liquid in nature and are typically converted to cash within three days of the sales transaction.

Accounts Receivable
Accounts receivable, net of the allowance for doubtful accounts, represents their estimated net realizable value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Accounts receivable are written off when they are deemed uncollectible. See Note 2 – Accounts Receivable for additional information.

Land, Buildings and Equipment, Net
Land, buildings and equipment are recorded at cost less accumulated depreciation. Repair and maintenance costs incurred to maintain the appearance and functionality of the land, buildings and equipment that do not extend its useful life or that are less than $1 are expensed as incurred. Building components are depreciated over estimated useful lives ranging from seven to 40 years using the straight-line method. Leasehold improvements, which are reflected on our consolidated balance sheets as a component of buildings, are amortized over the lesser of the expected lease term, including cancelable option periods, or the estimated useful lives of the related assets using the straight-line method. Equipment is depreciated over estimated useful lives ranging from two to ten years also using the straight-line method. Accelerated depreciation methods are generally used for income tax purposes. Depreciation and amortization expense associated with buildings and equipment amounted to $214,272, $206,552 and $203,349, in fiscal 2006, 2005 and 2004, respectively. In fiscal 2006, 2005 and 2004, we had losses on disposal of land, buildings and equipment of $2,719, $1,164 and $104, respectively, which were included in selling, general and administrative expenses. See Note 4 – Land, Buildings and Equipment, Net for additional information.

Capitalized Software Costs
Capitalized software, which is a component of other assets, is recorded at cost less accumulated amortization. Capitalized software is amortized using the straight-line method over estimated useful lives ranging from three to ten years. The cost of capitalized software as of May 28, 2006 and May 29, 2005, amounted to $56,412 and $51,292, respectively. Accumulated amortization as of May 28, 2006 and Darden Restaurants 2006 Annual Report May 29, 2005, amounted to $25,437 and 19,877, respectively. Amortization expense associated with capitalized software amounted to $7,184, $6,667 and $6,655, in fiscal 2006, 2005 and 2004, respectively. Accumulated amortization as of May 28, 2006 and May 29, 2005, amounted to $25,437 and $19,877, respectively. Amortization expense associated with
capitalized software amounted to $7,184, $6,667 and
$6,655, in fiscal 2006, 2005 and 2004, respectively.