Pizza Hut 2009 Annual Report Download - page 157

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In our 2008 Consolidated Financial Statements, we reported Operating profit attributable to the non-controlling interest in
the Beijing entity in Other (income) expense and the related tax impact as a reduction to our Income tax provision.
Additionally, we reported the equity attributable to the Beijing entity within Other liabilities and deferred credits. As
required at the beginning of 2009, we began reporting Net income attributable to the non-controlling interest in Beijing
separately on the face of our Consolidated Statements of Income. Also as required, the portion of equity in the entity not
attributable to the Company began being reported within equity, separately from the Company’s equity on the
Consolidated Balance Sheet. These requirements were retroactive to our previous Consolidated Financial Statements and
we have restated 2008 accordingly.
See Note 5 for a further description of the accounting for the noncontrolling interests in the Beijing and Shanghai entities
and discussions on the impact on our Consolidated Financial Statements.
We participate in various advertising cooperatives with our franchisees and licensees established to collect and administer
funds contributed for use in advertising and promotional programs designed to increase sales and enhance the reputation
of the Company and its franchise owners. Contributions to the advertising cooperatives are required for both Company
operated and franchise restaurants and are generally based on a percent of restaurant sales. In certain of these
cooperatives we possess majority voting rights, and thus control and consolidate the cooperatives. We report all assets
and liabilities of these advertising cooperatives that we consolidate as advertising cooperative assets, restricted and
advertising cooperative liabilities in the Consolidated Balance Sheet. The advertising cooperatives assets, consisting
primarily of cash received from the Company and franchisees and accounts receivable from franchisees, can only be used
for selected purposes and are considered restricted. The advertising cooperative liabilities represent the corresponding
obligation arising from the receipt of the contributions to purchase advertising and promotional programs. As the
contributions to these cooperatives are designated and segregated for advertising, we act as an agent for the franchisees
and licensees with regard to these contributions. Thus, we do not reflect franchisee and licensee contributions to these
cooperatives in our Consolidated Statements of Income or Consolidated Statements of Cash Flows.
Fiscal Year. Our fiscal year ends on the last Saturday in December and, as a result, a 53rd week is added every five or
six years. The Company’s next fiscal year with 53 weeks will be 2011. The first three quarters of each fiscal year consist
of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53
weeks. Our subsidiaries operate on similar fiscal calendars with period or month end dates suited to their businesses. Our
U.S. and China subsidiaries’ period end dates are within one week of YUM’s period end date. All of our international
businesses except China close one period or one month earlier to facilitate consolidated reporting.
Foreign Currency. The functional currency determination for operations outside the U.S. is based upon a number of
economic factors, including but not limited to cash flows and financing transactions. Income and expense accounts are
translated into U.S. dollars at the average exchange rates prevailing during the period. Assets and liabilities are translated
into U.S. dollars at exchange rates in effect at the balance sheet date. Resulting translation adjustments are recorded in
Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet. Gains and losses arising from the
impact of foreign currency exchange rate fluctuations on transactions in foreign currency are included in Other (income)
expense in our Consolidated Statement of Income.
Reclassifications. We have reclassified certain items in the accompanying Consolidated Financial Statements and Notes
thereto for prior periods to be comparable with the classification for the fiscal year ended December 26, 2009. As rental
income from franchisees has increased over time and is anticipated to continue to increase, we believe it is more
appropriate to report such income as Franchise and license fees and income as opposed to a reduction in Franchise and
license expenses, as it has historically been reported. For the years ended December 27, 2008 and December 29, 2007 this
resulted in increases of $25 million and $19 million, respectively in both Franchise and license expenses and Franchise
and license fees and income in our Consolidated Statement of Income. A similar amount of rental income was reported in
Franchise and license fees and income in the year ended December 26, 2009.
Form 10-K