Pizza Hut 2009 Annual Report Download - page 173

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82
Note 10 – Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
U.S. YRI
China
Division Worldwide
Balance as of December 29, 2007
Goodwill, gross $ 358 $ 259 $ 60 $ 677
Accumulated impairment losses
—
(5
)
—
(5
)
Goodwill, net 358 254 60 672
Acquisitions 10
—
6 16
Impairment losses
—
—
—
—
Disposals and other, net(a) (12) (71
)
—
(83
)
Balance as of December 27, 2008
Goodwill, gross 356 188 66 610
Accumulated impairment losses
—
(5
)
— (5
)
Goodwill, net 356 183
66 605
Acquisitions 1
—
53 54
Impairment losses(b)(c) (26)
(12 )
—
(38
)
Disposals and other, net(a) (5)
24
—
19
Balance as of December 26, 2009
Goodwill, gross 352 212 119 683
Accumulated impairment losses (26) (17 )
—
(43
)
Goodwill, net
$
326
$
195
$
119
$
640
(a) Disposals and other, net for YRI primarily reflects the impact of foreign currency translation on existing
balances. Disposals and other, net for the U.S. Division, primarily reflects goodwill write-offs associated with
refranchising.
(b) We recorded a non-cash goodwill impairment charge of $26 million, which resulted in no related tax benefit,
associated with our LJS and A&W-U.S. reporting unit in the fourth quarter of 2009 as the carrying value of this
reporting unit exceeded its fair value. The fair value of the reporting unit was based on our discounted
expected after-tax cash flows from the future royalty stream, net of G&A, expected to be earned from the
underlying franchise agreements. These cash flows incorporated the decline in future profit expectations for
our LJS and A&W-U.S. reporting unit which were due in part to the impact of a reduced emphasis on multi-
branding as a U.S. growth strategy. This charge was recorded in Closure and impairment (income) expenses in
our Consolidated Statement of Income and was not allocated to the U.S. segment for performance reporting
purposes. See Note 5.
(c) We recorded a non-cash goodwill impairment charge of $12 million for our Pizza Hut South Korea reporting
unit in the fourth quarter of 2009 as the carrying value of this reporting unit exceeded its fair value. The fair
value of this reporting unit was based on the discounted expected after-tax cash flows from company operations
and franchise royalties for the business. Our expectations of future cash flows were negatively impacted by
recent profit declines the business has experienced. This charge was recorded in Closure and impairment
(income) expenses in our Consolidated Statement of Income and was allocated to our International segment for
performance reporting purposes.
Form 10-K