WeightWatchers 2007 Annual Report Download - page 72

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Advertising revenue is recognized when advertisements are published. Revenue from magazine sales is
recognized when the magazine is sent to the customer. Deferred revenue, consisting of prepaid meeting fees,
such as Monthly Pass, and magazine subscription revenue, is amortized into income over the period earned.
Discounts to customers, including free registration offers, are recorded as a deduction from gross revenue in the
period such revenue was recognized.
WeightWatchers.com primarily generates revenue from monthly Internet subscriptions. Subscription fee
revenues are recognized over the period that products are provided. One time sign up fees are deferred and
recognized over the expected customer relationship period. Subscription fee revenues that are paid in advance are
deferred and recognized on a straight-line basis over the subscription period.
We grant refunds at aggregate amounts that historically have not been material. Because the period of
payment of the refund generally approximates the period revenue was originally recognized, refunds are recorded
as a reduction of revenue when paid.
Advertising Costs:
Advertising costs consist primarily of national and local direct mail, television, and spokesperson’s fees. All
costs related to advertising are expensed in the period incurred, except for media production related costs that are
expensed the first time the advertising takes place. Total advertising expenses for the fiscal years ended
December 29, 2007, December 30, 2006 and December 31, 2005 were $194,960, $149,856 and $151,533,
respectively.
Income Taxes:
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income
Taxes.” Under SFAS No. 109, deferred income tax assets and liabilities result primarily from temporary
differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect
for the year in which differences are expected to reverse. If it is more likely than not that some portion of a
deferred tax asset will not be realized, a valuation allowance is recognized. We consider historic levels of
income, estimates of future taxable income and feasible tax planning strategies in assessing the need for a tax
valuation allowance.
On December 31, 2006, the first day of its 2007 fiscal year, the Company adopted the provisions of FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement
No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial
statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by
taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50
percent likely of being realized upon ultimate settlement. As a result of the December 31, 2006 adoption of FIN
48, the Company increased its tax liability for unrecognized tax benefits by $1,907, which was accounted for as a
reduction to the opening balance of retained earnings for fiscal 2007.
In addition, under SFAS No. 109 assets and liabilities acquired in purchase business combinations are
assigned their fair values and deferred taxes are provided for lower or higher tax bases.
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