Burger King 2012 Annual Report Download - page 84

Table of Contents
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determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change
in the future due to new developments in settlement strategy in dealing with these matters.
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We record a liability to reflect the estimated fair value of guarantee obligations at the inception of the guarantee. Expenses associated with the guarantee
liability, including the effects of any subsequent changes in the estimated fair value of the liability, are classified as other operating income (expenses), net in
our consolidated statements of operations.
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Amounts in the financial statements related to income taxes are calculated using the principles of FASB ASC Topic 740, Under these
principles, deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial
reporting purposes and the amounts recognized for tax purposes, as well as tax credit carryforwards and loss carryforwards. These deferred taxes are
measured by applying currently enacted tax rates. A deferred tax asset is recognized when it is considered more likely than not to be realized. The effects of
changes in tax rates on deferred tax assets and liabilities are recognized in income in the year in which the law is enacted. A valuation allowance reduces
deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be recognized.
Income tax benefits credited to stockholders’ equity relate to tax benefits associated with amounts that are deductible for income tax purposes but do not
affect earnings. These benefits are principally generated from employee exercises of nonqualified stock options and settlement of restricted stock awards.
We recognize positions taken or expected to be taken in a tax return, in the financial statements when it is more likely than not (i.e., a likelihood of more
than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of
benefit with greater than fifty percent likelihood of being realized upon ultimate settlement.
Transaction gains and losses resulting from the remeasurement of foreign deferred tax assets or liabilities are classified as other operating (income)
expense, net in the consolidated statements of operations.
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We recognize share-based compensation cost based on the grant date estimated fair value of each award, net of estimated forfeitures, over the employee’s
requisite service period, which is generally the vesting period of the equity grant. For awards that have a cliff-vesting schedule, share-based compensation cost
is recognized ratably over the requisite service period.
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The funded status of our defined benefit pension plans and postretirement benefit plans are recognized in the consolidated balance sheets. The funded
status is measured as the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date. The fair value of
plan assets represents the current market value of contributions made to irrevocable trust funds, held for the sole benefit of participants, which are invested by
the trust funds. For defined benefit pension plans, the benefit obligation represents the
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Source: Burger King Worldwide, Inc., 10-K, February 22, 2013 Powered by Morningstar® Document Research℠
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