Jack In The Box 2012 Annual Report Download - page 46

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


Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box ® quick-service restaurants and
Qdoba Mexican Grill® (“Qdoba”) fast-casual restaurants. The following summarizes the number of restaurants:




Company-operated
547
629
956
Franchise
1,703
1,592
1,250
Total system
2,250
2,221
2,206

Company-operated
316
245
188
Franchise
311
338
337
Total system
627
583
525
References to the Company throughout these notes to the consolidated financial statements are made using the first person notations of “we,” “us” and “our.”
Basis of presentation — The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles and the rules and regulations of the Securities and Exchange Commission (“SEC”). During the fourth quarter of 2012, we entered into an agreement
to outsource our Jack in the Box distribution business. As such, the results of operations for our distribution business for all periods presented are reported as
discontinued operations. Refer to Note 2, Discontinued Operations, for additional information. Unless otherwise noted, amounts and disclosures throughout
these notes to the consolidated financial statements relate to our continuing operations.
Principles of consolidation — The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts
of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated.
The Financial Accounting Standards Board (“FASB”) authoritative guidance on consolidation requires the primary beneficiary of a VIE to consolidate that
entity. The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in the VIE. Controlling financial interest exists when an
enterprise has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the
right to receive benefits of the VIE that could potentially be significant to the VIE.
The primary entities in which we possess a variable interest are franchise entities, which operate our franchise restaurants. We do not possess any ownership
interests in franchise entities. We have reviewed these franchise entities and determined that we are not the primary beneficiary of the entities and therefore,
these entities have not been consolidated. We hold and consolidate a variable interest in a subsidiary formed for the purpose of operating a franchisee lending
program. For information related to this VIE, refer to Note 15, Variable Interest Entities.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2012 and 2011 include 52 weeks while 2010
includes 53 weeks.
Use of estimates — In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is
required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies.
In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts
in a particular area. Actual amounts could differ materially from these estimates.
Cash and cash equivalents — We invest cash in excess of operating requirements in short-term, highly liquid investments with original maturities of three
months or less, which are considered cash equivalents.
Accounts and other receivables, net is primarily comprised of receivables from franchisees, tenants and credit card processors. Franchisee receivables
primarily include rents, royalties, and marketing fees associated with the franchise agreements, and
F-6