Jack In The Box 2015 Annual Report Download - page 57

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sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. Refer to Note 10, Income Taxes, for additional information.
Derivative instruments — From time to time, we use interest rate swap agreements to manage interest rate exposure. We do not speculate using derivative
instruments. We purchase derivative instruments only for the purpose of risk management.
All derivatives are recognized on the consolidated balance sheets at fair value based upon quoted market prices. Changes in the fair values of derivatives are
recorded in earnings or other comprehensive income (“OCI”), based on whether or not the instrument is designated as a hedge transaction. Gains or losses on
derivative instruments that qualify for hedge designation are reported in OCI and 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 OCI 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 August 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-15, “ Interest-Imputation of
Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which addresses line-of-credit
arrangements that were omitted from ASU No. 2015-03 (see below). This ASU states that the SEC staff would not object to an entity deferring and presenting
debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortizing those costs ratably over the term of the arrangement,
regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This new standard is effective for annual reporting periods
beginning after December 15, 2015, including interim periods within that reporting period, with early adoption permitted. We do not expect that this
standard will have a material impact on our consolidated financial statements or disclosures upon adoption.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), 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, 2017. 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 April 2015, the FASB issued ASU No. 2015-04, Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan
Assets, which provides a practical expedient that permits a company to measure defined benefit plan assets and obligations using the month-end date that is
closest to the company's fiscal year-end and apply that practical expedient consistently from year to year. The practical expedient should be applied
consistently to all plans if the company has more than one plan. This ASU is effective prospectively for financial statements issued for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. We early adopted this standard in fiscal 2015 and
measured our defined benefit plan assets and obligation as of September 30, 2015, which did not have a material impact on our consolidated financial
statements and related disclosures.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance
costs in financial statements. Under this ASU, an entity presents such costs on the balance sheet as a direct deduction from the related debt liability rather
than as an asset. This new standard is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that
reporting period, with early adoption permitted. We do not plan to adopt this standard early and do not expect that it will have a material impact on our
consolidated financial statements or disclosures upon adoption.
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