Recent Accounting Pronouncements |
12 Months Ended |
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Dec. 27, 2015 | |
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| Recent Accounting Pronouncements |
Recent Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the financial statement presentation of deferred income taxes. The new guidance requires an entity to present deferred tax assets and liabilities as non-current in a classified balance sheet. Prior to the issuance of this guidance, deferred tax liabilities and assets were required to be separately classified into a current amount and a non-current amount in the balance sheet. The new guidance represents a change in accounting principle and is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company elected to early adopt this guidance as of December 27, 2015 and to apply it prospectively. Prior period information was not adjusted. Because the application of this guidance affects the balance sheet classification only, adoption of this guidance did not have a material impact on our consolidated financial statements.
In September 2015, the FASB issued guidance on the recognition of adjustments to preliminary amounts recognized in a business combination, which removes the requirement to retrospectively account for these adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior period impact of the adjustment should be either presented separately on the face of the income statement or disclosed in the notes. The guidance is effective for reporting periods beginning after December 15, 2015 with early adoption permitted. The Company will apply the guidance prospectively and does not expect the adoption will have a material impact on our consolidated financial statements.
In July 2015, the FASB issued guidance on the subsequent measurement of inventory, which changes the measurement from lower of cost or market to lower of cost and net realizable value. The guidance requires prospective application for reporting periods beginning after December 15, 2016 and permits adoption in an earlier period. The early adoption of this guidance in 2015 did not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue standard. The guidance is now effective for reporting periods beginning after December 15, 2017 with early adoption permitted. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Based on our preliminary assessment, we determined the adoption of this new guidance may change the timing of recognition of our initial franchise fees. The initial franchise fee is currently recognized when the Company has performed all material obligations and initial services, which generally occurs upon the opening of the new restaurant. The new guidance will require the Company to recognize the initial franchise fees over the franchise period. The adoption of the new guidance may also change the classification of the advertising fund contribution the Company receives from franchisees and the spending from advertising funds. The new guidance will supersede the net reporting requirement on advertising funds. The advertising fund contribution and spending could be reported gross as advertising revenue and advertising expense, and with gross reporting, revenues and expenses could be recognized in different periods. We are continuing our assessment of the overall impact this guidance will have on our consolidated financial statements, as well as the expected timing and method of adoption.
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