WeightWatchers 2015 Annual Report Download - page 87

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
maintenance and enhancements, including the cost of website content, which do not result in additional
functionality, are expensed as incurred.
Revenue Recognition:
WWI earns revenue by conducting meetings, for which it charges a fee, predominantly through monthly
commitment plans, prepayment plans or the “pay-as-you-go” arrangement. WWI also earns revenue from
monthly subscriptions for its Online products, selling products in its meetings, on the Internet and to its
franchisees, collecting commissions from franchisees, collecting royalties related to licensing agreements, selling
magazine subscriptions, selling advertising space on its website and in copies of its 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, consisting of
the fees associated with subscriptions for the Company’s Online subscription products, including its Personal
Coaching product, 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. In the meetings business, WWI generally charges non-refundable registration and starter fees in
exchange for an introductory information session and materials it provides to new members. Revenue from these
registration and starter fees is 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 its website is recognized when the advertisement is viewed by the user.
The Company grants 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.
Advertising Costs:
Advertising costs consist primarily of television and digital media. All costs related to advertising are
expensed in the period incurred, except for media production-related costs, which are expensed the first time the
advertising takes place. Total advertising expenses for the fiscal years ended January 2, 2016, January 3, 2015
and December 28, 2013 were $191,060, $251,954, and $285,298, respectively.
Income Taxes:
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. The Company considers historic levels of income, estimates of future
taxable income and feasible tax planning strategies in assessing the need for a tax valuation allowance.
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