Jack In The Box 2014 Annual Report Download - page 56

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designated as a hedge transaction. Gains or losses on derivative instruments reported in other comprehensive income (“OCI”) are reclassified to earnings in
the period the hedged item affects earnings. If the underlying hedge transaction ceases to exist, any associated amounts reported in other comprehensive
income are reclassified to earnings at that time. Any ineffectiveness is recognized in earnings in the current period. Refer to Note 5, Fair Value
Measurements, and Note 6, Derivative Instruments, for additional information regarding our derivative instruments.
Contingencies — We recognize liabilities for contingencies when we have an exposure that indicates it is probable that an asset has been impaired or that a
liability has been incurred and the amount of impairment or loss can be reasonably estimated. Our ultimate legal and financial liability with respect to such
matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best
estimate within the range. We record legal settlement costs when those costs are probable and reasonably estimable.
Segment reporting — An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues
and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision makers in deciding how to allocate
resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. We operate our business in two
operating segments, Jack in the Box and Qdoba Restaurant Operations. Refer to Note 17, Segment Reporting, for additional discussion regarding our
segments.
Effect of new accounting pronouncements — In April 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial
Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components
of an Entity, which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts that have or will
have a major effect on an entity's operations and financial results. This ASU also expands the disclosure requirements for disposals which meet the definition
of a discontinued operation and requires entities to disclose information about disposals of individually significant components that do not meet the
definition of discontinued operations. The standard is effective prospectively for annual and interim periods beginning after December 15, 2014, with early
adoption permitted. This pronouncement is not expected to have a material impact on our consolidated financial statements upon adoption.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a comprehensive new revenue recognition model
that requires a company to recognize revenue in an amount that reflects the consideration it expects to receive for the transfer of promised goods or services
to its customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from
contracts with customers. This ASU is effective for annual periods and interim periods beginning after December 15, 2016. The ASU is to be applied
retrospectively or using a cumulative effect transition method and early adoption is not permitted. We are currently evaluating the effect that this
pronouncement will have on our consolidated financial statements and related disclosures.
In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target
Could Be Achieved after the Requisite Service Period, which requires a reporting entity to treat a performance target that affects vesting and that could be
achieved after the requisite service period as a performance condition. This standard is to be applied prospectively for annual and interim periods beginning
after December 15, 2015, with early adoption permitted. This pronouncement is not expected to have a material impact on our consolidated financial
statements upon adoption.
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Distribution business — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by our
board of directors to sell our Jack in the Box distribution business. During the first quarter of fiscal 2013, we completed the transition of our distribution
centers. The operations and cash flows of the business have been eliminated and in accordance with the provisions of the Accounting Standards Codification
(“ASC”) 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.
The following is a summary of our distribution business results, which are included in discontinued operations for each fiscal year (in thousands):
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Revenue
$ —
$ 37,743
$ 616,982
Loss before income tax benefit
$ (1,276)
$ (6,446)
$ (8,777)
F-12