Chili's 2007 Annual Report Download - page 67

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BRINKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
Our consolidated financial statements include the accounts of Brinker International, Inc. and our
wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. We own, operate, or franchise various restaurant brands principally located in the United
States.
We have a 52/53 week fiscal year ending on the last Wednesday in June. Fiscal years 2007, 2006, and
2005, which ended on June 27, 2007, June 28, 2006, and June 29, 2005, respectively, each contained 52
weeks.
In November 2006, the Board of Directors declared and the company paid a three-for-two stock split,
effected in the form of a 50% stock dividend. As a result of the split, approximately 58.7 million shares of
common stock were issued in November 2006. All references to the number of shares and per share
amounts of common stock have been restated to reflect the stock split. Shareholders’ equity accounts have
been restated to reflect the reclassification of the par value of the increase in issued common shares from
the retained earnings account to the common stock account.
Certain prior year amounts in the accompanying consolidated financial statements have been
reclassified to conform with fiscal 2007 presentation. These reclassifications have no effect on our net
income or financial position as previously reported.
(b) Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and costs and expenses during the reporting period. Actual results could differ from those
estimates.
(c) Revenue Recognition
We record revenue from the sale of food, beverages and alcohol as products are sold. Initial fees
received from a franchisee to establish a new franchise are recognized as income when we have performed
our obligations required to assist the franchisee in opening a new franchise restaurant, which is generally
upon the opening of such restaurant. Continuing royalties, which are a percentage of net sales of
franchised restaurants, are accrued as income when earned. Proceeds from the sale of gift cards are
recorded as deferred revenue and recognized as income when redeemed by the holder.
(d) Financial Instruments
Our policy is to invest cash in excess of operating requirements in income-producing investments.
Income-producing investments with original maturities of three months or less are reflected as cash
equivalents.
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