Pizza Hut 2010 Annual Report Download - page 166

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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 except that certain international subsidiaries operate on a
monthly calendar, with two months in the first quarter, three months in the second and third quarters and four months in
the fourth quarter. 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 and are subsequently recognized as
income or expense only upon sale or upon complete or substantially complete liquidation of the related investment in a
foreign entity. 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 25, 2010. These
reclassifications had no effect on previously reported Net Income – YUM! Brands, Inc.
Franchise and License Operations. We execute franchise or license agreements for each unit which set out the terms of
our arrangement with the franchisee or licensee. Our franchise and license agreements typically require the franchisee or
licensee to pay an initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject to our
approval and their payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its
expiration.
Form 10-K