Pizza Hut 2014 Annual Report Download - page 137

PART II
ITEM 8 Financial Statements and Supplementary Data
Notes to Consolidated Financial Statements
(Tabular amounts in millions, except share data)
Description of Business
YUM! Brands, Inc. and Subsidiaries (collectively referred to herein as As of December 27, 2014, YUM consisted of five operating segments:
‘‘YUM’’ or the ‘‘Company’’) comprise primarily the worldwide YUM China (‘‘China’’ or ‘‘China Division’’) which includes all
operations of KFC, Pizza Hut and Taco Bell (collectively the operations in mainland China
‘‘Concepts’’). YUM has over 41,000 units of which 56% are located
outside the U.S. in more than 125 countries and territories. YUM was YUM India (‘‘India’’ or ‘‘India Division’’) which includes all operations
created as an independent, publicly-owned company on October 6, in India, Bangladesh, Nepal and Sri Lanka
1997 via a tax-free distribution by our former parent, PepsiCo, Inc., of
The KFC Division which includes all operations of the KFC concept
our Common Stock to its shareholders. References to YUM
outside of China Division and India Division
throughout these Consolidated Financial Statements are made using
the first person notations of ‘‘we,’’ ‘‘us’’ or ‘‘our.’’ The Pizza Hut Division which includes all operations of the Pizza Hut
concept outside of China Division and India Division
Through our widely-recognized Concepts, we develop, operate,
franchise and license a system of both traditional and non-traditional The Taco Bell Division which includes all operations of the Taco Bell
quick service restaurants. Each Concept has proprietary menu items concept outside of India Division
and emphasizes the preparation of food with high quality ingredients
as well as unique recipes and special seasonings to provide Prior to 2014, our reporting segments consisted of YUM Restaurants
appealing, convenient, tasty and attractive food at competitive prices. International (‘‘YRI’’), the United States, China and India. In the first
Our traditional restaurants feature dine-in, carryout and, in some quarter of 2014 we changed our management reporting structure to
instances, drive-thru or delivery service. Non-traditional units, which align our global operations outside of China and India by brand. As a
are principally licensed outlets, include express units and kiosks which result, our YRI and United States reporting segments were combined,
have a more limited menu and operate in non-traditional locations like and we began reporting this information by three new reporting
malls, airports, gasoline service stations, train stations, subways, segments: KFC Division, Pizza Hut Division and Taco Bell Division.
convenience stores, stadiums, amusement parks and colleges, where China and India remain separate reporting segments. This new
a full-scale traditional outlet would not be practical or efficient. We also structure is designed to drive greater global brand focus, enabling us
operate multibrand units, where two or more of our Concepts are to more effectively share know-how and accelerate growth. While our
operated in a single unit. consolidated results have not been impacted, we have restated our
comparable segment information for consistent presentation.
Summary of Significant Accounting Policies
Our preparation of the accompanying Consolidated Financial Our most significant variable interests are in entities that operate
Statements in conformity with Generally Accepted Accounting restaurants under our Concepts’ franchise and license arrangements.
Principles in the United States of America (‘‘GAAP’’) requires us to We do not generally have an equity interest in our franchisee or
make estimates and assumptions that affect reported amounts of licensee businesses with the exception of certain entities in China as
assets and liabilities, disclosure of contingent assets and liabilities at discussed below. Additionally, we do not typically provide significant
the date of the financial statements, and the reported amounts of financial support such as loans or guarantees to our franchisees and
revenues and expenses during the reporting period. Actual results licensees. However, we do have variable interests in certain
could differ from these estimates. franchisees through real estate lease arrangements with them to
which we are a party. At the end of 2014, YUM has future lease
Principles of Consolidation and Basis of Preparation. payments due from franchisees, on a nominal basis, of approximately
Intercompany accounts and transactions have been eliminated in $350 million. As our franchise and license arrangements provide our
consolidation. We consolidate entities in which we have a controlling franchisee and licensee entities the power to direct the activities that
financial interest, the usual condition of which is ownership of a most significantly impact their economic performance, we do not
majority voting interest. We also consider for consolidation an entity, consider ourselves the primary beneficiary of any such entity that
in which we have certain interests, where the controlling financial might otherwise be considered a VIE.
interest may be achieved through arrangements that do not involve
See Note 18 for additional information on an entity that operates a
voting interests. Such an entity, known as a variable interest entity
franchise lending program that is a VIE in which we have a variable
(‘‘VIE’’), is required to be consolidated by its primary beneficiary. The
interest but for which we are not the primary beneficiary and thus do
primary beneficiary is the entity that possesses the power to direct the
not consolidate.
activities of the VIE that most significantly impact its economic
performance and has the obligation to absorb losses or the right to Certain investments in entities that operate KFCs in China are
receive benefits from the VIE that are significant to it. accounted for by the equity method. These entities are not VIEs and
our lack of majority voting rights precludes us from controlling these
YUM! BRANDS, INC. - 2014 Form 10-K 43
NOTE 1
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NOTE 2
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Form 10-K