Chili's 2015 Annual Report Download - page 55

BRINKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations
We are principally engaged in the ownership, operation, development, and franchising of the Chili’s Grill &
Bar (“Chili’s”) and Maggiano’s Little Italy (“Maggiano’s”) restaurant brands. At June 24, 2015, we owned,
operated, or franchised 1,629 restaurants in the United States and 29 countries and two territories outside of the
United States.
(b) Basis of Presentation
Our consolidated financial statements include the accounts of Brinker International, Inc. and our wholly-
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
We have a 52/53 week fiscal year ending on the last Wednesday in June. Fiscal years 2015, 2014, and 2013
which ended on June 24, 2015, June 25, 2014, and June 27, 2013, respectively, each contained 52 weeks.
We discovered an immaterial error related to the classification of certain revenues and expenses in the
consolidated statements of comprehensive income in the previously issued financial statements for the year
ended June 25, 2014 primarily related to Maggiano’s delivery services. The amounts had previously been
reported net instead of gross. The error did not impact net income as previously reported or any prior amounts
reported on the consolidated balance sheets, statements of cash flows or statements of shareholders’ (deficit)
equity. We corrected the error by adjusting the previously reported consolidated statements of comprehensive
income for the fifty-two week periods ended June 25, 2014 and June 27, 2013, which resulted in a $4.0 million,
and a $3.6 million increase in franchise and other revenues and restaurant expenses, respectively.
Revenues are presented in two separate captions on the consolidated statements of comprehensive income to
provide more clarity around company-owned restaurant revenue and operating expense trends. Company sales
includes revenues generated by the operation of company-owned restaurants including gift card redemptions.
Franchise and other revenues includes royalties, development fees, franchise fees, Maggiano’s banquet service
charge income, certain gift card activity (breakage and discounts), tabletop gaming revenue, retail food royalties
and delivery fee income.
We report certain labor and related expenses in a separate caption on the consolidated statements of
comprehensive income titled restaurant labor. Restaurant labor includes all compensation-related expenses,
including benefits and incentive compensation, for restaurant team members at the general manager level and
below. Labor-related expenses attributable to multi-restaurant (or above-restaurant) supervision is included in
restaurant expenses.
(c) Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and costs and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Revenue Recognition
We record revenue from the sale of food, beverages and alcohol as products are sold. Initial fees received
from a franchisee to establish a new franchise are recognized as income when we have performed our obligations
F-19