WeightWatchers 2015 Annual Report Download - page 46

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constant currency basis as excluding or adjusting for the impact of foreign currency or being on a constant
currency basis. These results should be considered in addition to, not as a substitute for, results reported in
accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to
similarly titled measures used by other companies and are not measures of performance presented in accordance
with GAAP.
Critical Accounting Policies
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon
our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis,
we evaluate our estimates and judgments, including those related to inventories, the impairment analysis for
goodwill and other indefinite-lived intangible assets, share-based compensation, income taxes, tax contingencies
and litigation. We base our estimates on historical experience and on various other factors and assumptions that
we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
We believe the following accounting policies are most important to the portrayal of our financial condition
and results of operations and require our most significant judgments and estimates.
Revenue Recognition
We earn revenue by conducting meetings, for which we charge a fee, predominantly through monthly
commitment plans, prepayment plans or the “pay-as-you-go” arrangement. We also earn revenue from monthly
subscriptions for our Online products, selling products in our meetings, on the Internet and to our franchisees,
collecting commissions from franchisees, collecting royalties related to licensing agreements, selling magazine
subscriptions, selling advertising space on our website and in copies of our magazines, ecommerce fees and By
Mail product sales.
Monthly commitment plans, prepaid meeting fees and magazine subscription revenue is recorded to
deferred revenue and amortized into revenue over the period earned. Online Subscription 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. Online Subscription Revenues that are paid in advance are deferred
and recognized on a straight-line basis over the subscription period. Revenue from “pay-as-you-go” meeting fees,
product sales, ecommerce fees, By Mail, commissions and royalties is recognized when services are rendered,
products are shipped to customers and title and risk of loss pass to the customers, and commissions and royalties
are earned, respectively. Revenue from advertising in magazines is recognized when advertisements are
published. Revenue from magazine sales is recognized when the magazine is sent to the customer. We generally
charge non-refundable registration and starter fees in exchange for an introductory information session and
materials we provide to new members in our meetings business. Revenue from these registration and starter fees
are recognized when the service and products are provided, which is generally at the same time payment is
received from the customer. Discounts to customers, including free registration offers, are recorded as a
deduction from gross revenue in the period such revenue was recognized. Revenue from advertising on our
website is recognized when the advertisement is viewed by the user.
We grant refunds in 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.
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