Papa Johns 2011 Annual Report Download - page 72

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67
2. Significant Accounting Policies (continued)
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation, including:
•
The reclassification of certain assets and liabilities between current and long-term in our
consolidated balance sheet and consolidated statements of cash flows.
•
The reclassification of amounts related to our noncontrolling interests within our operating and
financing activities in our consolidated statements of cash flows.
Segment Reporting Change
In 2011, the Company realigned management responsibility and financial reporting for Hawaii, Alaska
and Canada from our international business segment to our domestic franchising segment in order to
better leverage existing infrastructure and systems. As a result, we renamed the domestic franchising
segment “North America franchising” in the first quarter of 2011. Certain prior year amounts have been
reclassified in our consolidated statements of income, segment information and restaurant unit
progression to conform to the current year presentation.
Subsequent Events
The Company evaluated subsequent events through the date the financial statements were issued and
filed. There were no subsequent events that required recognition or disclosure.
3. Accounting for Variable Interest Entities
The Consolidation topic of the ASC provides a framework for identifying variable interest entities
(“VIEs”) and determining when a company should include the assets, liabilities, noncontrolling interests
and results of activities of a VIE in its consolidated financial statements.
In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal structure
used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its
principal activities without additional subordinated financial support, (2) has a group of equity owners
that are unable to make significant decisions about its activities, or (3) has a group of equity owners that
do not have the obligation to absorb losses or the right to receive returns generated by its operations.
Consolidation of a VIE is required if a party with an ownership, contractual or other financial interest in
the VIE (“a variable interest holder”) is obligated to absorb a majority of the risk of loss from the VIE’s
activities, is entitled to receive a majority of the VIE’s residual returns (if no party absorbs a majority of
the VIE’s losses), or both. A variable interest holder that consolidates the VIE is called the primary
beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE’s
assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it
were consolidated based on majority voting interest. The variable interest holder is also required to make
disclosures about VIEs in which it has significant variable interest even when it is not required to
consolidate.