Papa Johns 2015 Annual Report Download - page 76

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63
2. Significant Accounting Policies (continued)
Foreign Currency Translation
The local currency is the functional currency for our subsidiaries located in the United Kingdom, Mexico
and China. Revenues and expenses are translated into U.S. dollars using monthly average exchange rates,
while assets and liabilities are translated using year-end exchange rates. The resulting translation
adjustments are included as a component of AOCI net of income taxes.
Recent Accounting Pronouncements
Income Taxes
In November 2015, the Financial Accounting Standards Board (“FASB”) issued “Income Taxes (Topic
740): Balance Sheet Classification of Deferred Taxes” (Accounting Standards Update (“ASU” 2015-17).
ASU 2015-17 requires the Company to classify deferred tax assets and liabilities as noncurrent amounts
in the consolidated balance sheets. Such amounts were previously required to be classified as current and
noncurrent assets and liabilities. The Company is required to adopt the provisions of ASU 2015-17 for
fiscal 2017; however, the Company elected to retrospectively adopt the provisions for fiscal 2015, as
allowed, and reclassified all previously reported current amounts as long-term. The consolidated balance
sheet at December 28, 2014 includes a reclassification of $8.2 million from the previously reported
current deferred income tax asset to a long-term deferred income tax liability.
Deferred Debt Issuance Costs
In April 2015, the FASB issued “Interest – Imputation of Interest: Simplifying the Presentation of Debt
Issuance Costs” (ASU 2015-03). This update will require the Company to report deferred debt issuance
costs as a reduction to long-term debt in the consolidated balance sheets. The Company currently reports
these costs, which approximate $900,000 in 2015 and $1.2 million in 2014 as other noncurrent assets in
the consolidated balance sheets. The Company will adopt ASU 2015-03 beginning in fiscal 2016 for all
retrospective periods, as required.
Revenue from Contract with Customers
In May 2014, the FASB issued “Revenue from Contracts with Customers” (ASU 2014-09), a
comprehensive new revenue recognition standard that will supersede nearly all existing revenue
recognition guidance under GAAP. This update requires companies to recognize revenue at amounts that
reflect the consideration to which the company expects to be entitled in exchange for those goods or
services at the time of transfer. In doing so, companies will need to use more judgment and make more
estimates than under today’s guidance. Such estimates may include identifying performance obligations
in the contract, estimating the amount of variable consideration to include in the transaction price and
allocating the transaction price to each separate performance obligation. Companies can either apply a full
retrospective adoption or a modified retrospective adoption.
We are required to adopt the new requirements in the first quarter of 2018. We are currently evaluating
the method of adoption and impact of the new requirements on our consolidated financial statements. We
currently do not believe the impact will be significant.