WeightWatchers 2007 Annual Report Download - page 69

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Weight Watchers
International, Inc. and its wholly-owned subsidiaries, which effective December 16, 2005 includes
WeightWatchers.com, Inc. and its subsidiaries (collectively, “WeightWatchers.com” or “WW.com”). From the
second quarter of 2004 through the second quarter of 2005, WW.com was consolidated pursuant to Financial
Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities”
(“FIN 46R”). As a result of Weight Watchers International, Inc.’s increased ownership interest in WW.com (see
Notes 2 and 3), beginning with the third quarter of 2005, WW.com is consolidated pursuant to Accounting
Research Bulletin No. 51, “Consolidated Financial Statements.”
The term “Company” as used throughout this document is used to indicate Weight Watchers
International, Inc. and its wholly owned subsidiaries. The term “WWI” as used throughout this document is used
to indicate Weight Watchers International and its wholly-owned subsidiaries other than WeightWatchers.com.
2. Summary of Significant Accounting Policies
Fiscal Year:
The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52 or
53-week periods. Fiscal years 2007, 2006 and 2005 contained 52 weeks. WeightWatchers.com’s fiscal year ends
on December 31st of each year. This difference in fiscal years does not have a material effect on the consolidated
financial statements.
Consolidation:
On January 17, 2003, the FASB issued Interpretation No. 46 (“FIN 46”), to clarify when an entity should
consolidate another entity known as a variable interest entity (“VIE”). The standard required that, under certain
circumstances, separate businesses with some common ownership be consolidated for financial reporting
purposes. Upon adoption of the original FIN 46, the Company would not have met those circumstances, and it
therefore would not have consolidated WeightWatchers.com’s financial statements.
On December 24, 2003, the FASB issued FIN 46R, which replaced FIN 46. FIN 46R is applicable for
financial statements issued for reporting periods after March 15, 2004. FIN 46R requires that an entity
consolidate a VIE if that enterprise has a variable interest that will absorb a majority of the VIE’s expected
losses, will receive a majority of the VIE’s expected residual returns, or both.
Based on the revisions in FIN 46R, WWI was required to reevaluate its relationship with its affiliate and
licensee, WeightWatchers.com. In the course of this reevaluation, it determined that WeightWatchers.com was a
VIE under FIN 46R and that WWI was its primary beneficiary. Effective April 3, 2004, the Company
consolidated WeightWatchers.com. In accordance with the provisions of FIN 46R, the Company recorded a
charge of $11,941, including a tax charge of $9,866, in the quarter ended April 3, 2004 for the cumulative effect
of this accounting change. This charge reflected the cumulative impact to the Company’s results of operations
had WeightWatchers.com been consolidated since its inception in September 1999. Beginning in the first fiscal
quarter ended April 3, 2004, the Company’s consolidated balance sheet includes the balance sheet of
WeightWatchers.com. Effective at the beginning of the second fiscal quarter of 2004, the Company’s
consolidated statement of operations and statement of cash flows include the results of WeightWatchers.com. All
intercompany balances have been eliminated in consolidation.
F-7