El Pollo Loco 2016 Annual Report Download - page 69
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
valuethatisrequiredtobedisclosedforfinancialinstrumentsmeasuredatamortizedcost.ThesechangesbecomeeffectivefortheCompany'sfiscalyear
beginningDecember_28,2017andinterimperiodswithinthatfiscalyear.TheimpactofthisexpectedadoptionofASU2016-01isbeingevaluatedbythe
Company.
InNovember2015,theFASBissuedASUNo.2015-17,“IncomeTaxes”whichrequiresthatdeferredtaxliabilitiesandassetsbeclassifiedasnoncurrentina
classifiedbalancesheet.Priortotheissuanceofthestandard,deferredtaxliabilitiesandassetswererequiredtobeseparatelyclassifiedintoacurrentamountanda
noncurrentamountinthebalancesheet.Thenewaccountingguidancerepresentsachangeinaccountingprincipleandthestandardisrequiredtobeadoptedin
annualperiodsbeginningafterDecember15,2016.AftertheadoptionofthisASUalldeferredtaxassetsandliabilitieswillbeclassifiedasnoncurrentonthe
consolidatedbalancesheet.
InJuly2015,theFASBissuedASUNo.2015-11,“Inventory(Topic330).”Thepronouncementwasissuedtosimplifythemeasurementofinventoryandchanges
themeasurementfromlowerofcostormarkettolowerofcostandnetrealizablevalue.Thispronouncementiseffectiveforreportingperiodsbeginningafter
December15,2016.TheadoptionofASU2015-11isnotexpectedtohaveasignificantimpactontheCompany’sconsolidatedfinancialpositionorresultsof
operations.
InApril2015,theFASBissuedASU2015-03,“Interest–ImputationofInterest(Subtopic835-30):SimplifyingthePresentationofDebtIssuanceCosts”.This
updaterequiresdebtissuancecostsrelatedtoarecognizeddebtliabilitytobepresentedinthebalancesheetasadirectdeductionfromthecarryingvalueofthat
debtliability,consistentwithdebtdiscounts.Therecognitionandmeasurementguidancefordebtissuancecostswerenotaffectedbythisupdate.The
pronouncementiseffectiveforreportingperiodsbeginningafterDecember15,2015andinterimperiodswithinthosefiscalyears.TheadoptionofASU2015-03is
notexpectedtohaveasignificantimpactontheCompany’sconsolidatedfinancialpositionorresultsofoperations.
InJune2014,theFASBissuedASUNo.2014-12,“Compensation–StockCompensation(Topic718).”Thepronouncementwasissuedtoclarifytheaccounting
forshare-basedpaymentswhenthetermsofanawardprovidethataperformancetargetcouldbeachievedaftertherequisiteserviceperiod.Thepronouncementis
effectiveforreportingperiodsbeginningafterDecember15,2015.TheadoptionofASU2014-12isnotexpectedtohaveasignificantimpactontheCompany’s
consolidatedfinancialpositionorresultsofoperations.
InMay2014,theFASBissuedAccountingStandardsUpdateNo.2014-09,“RevenuefromContractswithCustomers(ASU2014-09)”,whichsupersedesnearlyall
existingrevenuerecognitionguidanceunderGAAP.ThecoreprincipleofASU2014-09istorecognizerevenueswhenpromisedgoodsorservicesaretransferred
tocustomersinanamountthatreflectstheconsiderationtowhichanentityexpectstobeentitledforthosegoodsorservices.ASU2014-09definesafive-step
processtoachievethiscoreprincipleand,indoingso,morejudgmentandestimatesmayberequiredwithintherevenuerecognitionprocessthanarerequired
underexistingGAAP.
TherevisedrevenuestandardiseffectiveforpublicentitiesforannualperiodsbeginningafterDecember15,2017,andinterimperiodstherein,usingeitherofthe
followingtransitionmethods:(i)afullretrospectiveapproachreflectingtheapplicationofthestandardineachpriorreportingperiodwiththeoptiontoelectcertain
practicalexpedients,or(ii)aretrospectiveapproachwiththecumulativeeffectofinitiallyadoptingASU2014-09recognizedatthedateofadoption(which
includesadditionalfootnotedisclosures).TheCompanyiscurrentlyevaluatingtheimpactoftheCompany’spendingadoptionofASU2014-09ontheCompany’s
financialstatementsandhasnotyetdeterminedthemethodbywhichitwilladoptthestandardinfiscal2018.
InAugust2014,theFASBissuedASUNo.2014-15,GoingConcern(“ASU2014-15”).ASU2014-15providesGAAPguidanceonmanagement’sresponsibilityin
evaluatingwhetherthereissubstantialdoubtaboutacompany’sabilitytocontinueasagoingconcernandaboutrelatedfootnotedisclosures.Foreachreporting
period,managementwillberequiredtoevaluatewhetherthereareconditionsoreventsthatraisesubstantialdoubtaboutacompany’sabilitytocontinueasagoing
concernwithinoneyearfromthedatethefinancialstatementsareissued.ThestandardwillbeeffectiveforannualperiodsendingafterDecember15,2016,and
interimperiodswithinannualperiodsbeginningafterDecember15,2016.Earlyapplicationispermittedforannualorinterimreportingperiodsforwhichthe
financialstatementshavenotpreviouslybeenissued.UponadoptiontheCompanywillusetheguidanceinASU2014-15toassessgoingconcern.
Franchise Development Option Agreement with Related Party
OnJuly11,2014,EPLandTrimaranPolloPartners,L.L.C.(“LLC”)enteredintoaFranchiseDevelopmentOptionAgreementrelatingtodevelopmentofour
restaurantsintheNewYork–Newark,NY–NJ–CT–PACombinedStatisticalArea(the“Territory”).EPLgrantedLLCtheexclusiveoptiontodevelopandopen15
restaurantsintheTerritoryoverfiveyears(the“InitialOption”),and,providedthattheInitialOptionisexercised,theexclusiveoptiontodevelopandopenupto
anadditional100restaurantsintheTerritoryovertenyears.TheFranchiseDevelopmentOptionAgreementterminates(i)tenyearsafterexecution,or(ii)ifthe
InitialOptionisexercised,fiveyears
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