WeightWatchers 2012 Annual Report Download - page 91

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Cash Equivalents:
Cash and cash equivalents are defined as highly liquid investments with original maturities of three months
or less. Cash balances may, at times, exceed insurable amounts. The Company believes it mitigates this risk by
investing in or through major financial institutions. Cash includes balances due from third-party credit card
companies. Prior to 2012 the Company had included certain amounts due from third-party credit card companies
within accounts receivable and other amounts within cash. The consolidated financial statements for the year
ended 2011 and 2010 have been corrected to consistently include all such amounts within cash. These
adjustments were not considered to be material individually or in the aggregate to previously issued financial
statements. However, because of the significance of these adjustments, the Company revised its fiscal 2011 and
fiscal 2010 balance sheets and cash flow statements. The revision had no impact on the consolidated statements
of income, consolidated statements of comprehensive income or consolidated statements of changes in
stockholders’ equity for any of those periods. The effect of the revision on the previously reported amounts are as
follows:
December 31,
2011
January 1,
2011
Cash and cash equivalents ..................... $5,730 12% $ 2,811 7%
Receivables ................................ $(5,730) (12%) $(2,811) (6%)
Cash provided by operating activities ............ $2,919 1% $ 200 0%
Inventories:
Inventories, which consist of finished goods, are stated at the lower of cost or market on a first-in, first-out
basis, net of reserves for obsolescence and shrinkage.
Property and Equipment:
Property and equipment are recorded at cost. For financial reporting purposes, equipment is depreciated on
the straight-line method over the estimated useful lives of the assets (3 to 10 years). Leasehold improvements are
amortized on the straight-line method over the shorter of the term of the lease or the useful life of the related
assets. Expenditures for new facilities and improvements that substantially extend the useful life of an asset are
capitalized. Ordinary repairs and maintenance are expensed as incurred. When assets are retired or otherwise
disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are
included in income.
Impairment of Long Lived Assets:
The Company reviews long-lived assets, including amortizable intangible assets, for impairment whenever
events or changes in business circumstances indicate that the carrying amount of the assets may not be fully
recoverable.
Franchise Rights Acquired, Goodwill and Intangible Assets:
Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives
of 3 to 20 years. The Company reviews goodwill and other indefinite-lived intangible assets, including franchise
rights acquired, for potential impairment on at least an annual basis or more often if events so require. The
Company performed fair value impairment testing as of the end of fiscal 2012 and fiscal 2011 on its goodwill
and other indefinite-lived intangible assets and determined that the carrying amounts of these assets did not
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