Dunkin' Donuts 2012 Annual Report Download - page 66

-56-
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Description of business and organization
Dunkin’ Brands Group, Inc. (“DBGI”), together with its consolidated subsidiaries, is one of the world’s largest franchisors of
restaurants serving coffee and baked goods as well as ice cream within the quick service restaurant segment of the restaurant
industry. We develop, franchise, and license a system of both traditional and nontraditional quick service restaurants and, in
limited circumstances, own and operate individual locations. Through our Dunkin’ Donuts brand, we develop and franchise
restaurants featuring coffee, donuts, bagels, and related products. Through our Baskin-Robbins brand, we develop and franchise
restaurants featuring ice cream, frozen beverages, and related products. Additionally, we distribute Baskin-Robbins ice cream
products to Baskin-Robbins franchisees and licensees in certain international markets.
Throughout these financial statements, “Dunkin’ Brands,” “the Company,” “we,” “us,” “our,” and “management” refer to
DBGI and its consolidated subsidiaries taken as a whole.
(2) Summary of significant accounting policies
(a) Fiscal year
The Company operates and reports financial information on a 52- or 53-week year on a 13-week quarter basis with the fiscal
year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday
when applicable with respect to the fourth fiscal quarter). The data periods contained within fiscal years 2012 and 2010 reflect
the results of operations for the 52-week periods ended December 29, 2012 and December 25, 2010, respectively, and fiscal
year 2011 reflects the results of operations for the 53-week period ended December 31, 2011.
(b) Basis of presentation and consolidation
The accompanying consolidated financial statements include the accounts of DBGI and subsidiaries and have been prepared in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant
transactions and balances between subsidiaries have been eliminated in consolidation.
We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a
majority voting interest. We also consider for consolidation an entity, in which we have certain interests, where the controlling
financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a
variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity
that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the
obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. The principal entities in which
we possess a variable interest include franchise entities, the advertising funds (see note 4), and our equity method investees. We
do not possess any ownership interests in franchise entities, except for our investments in various entities that are accounted for
under the equity method. Additionally, we generally do not provide financial support to franchise entities in a typical franchise
relationship. As our franchise and license arrangements provide our franchisee and licensee entities the power to direct the
activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of
any such entity that might be a VIE. Based on the results of our analysis of potential VIEs, we have not consolidated any
franchise or other entities. The Company’s maximum exposure to loss resulting from involvement with potential VIEs is
attributable to aged trade and notes receivable balances, outstanding loan guarantees (see note 17(b)), and future lease
payments due from franchisees (see note 11).
The Company holds a 51% interest in a limited partnership that owns and operates Dunkin' Donuts restaurants in the Dallas,
Texas area. The Company possesses control of this entity and, therefore, consolidates the results of the limited partnership. The
noncontrolling interest is presented separately within stockholder's equity in the consolidated balance sheets. The net loss and
comprehensive loss attributable to the noncontrolling interest are presented separately in the consolidated statements of
operations and comprehensive income, respectively.
(c) Accounting estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the use of estimates, judgments,
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent
assets and liabilities at the date of the financial statements and for the period then ended. Significant estimates are made in the
calculations and assessments of the following: (a) allowance for doubtful accounts and notes receivables, (b) impairment of
tangible and intangible assets, (c) income taxes, (d) real estate reserves, (e) lease accounting estimates, (f) gift certificate