McDonalds 2007 Annual Report Download - page 54

Statement of cash fl ows
The Company considers short-term, highly liquid investments
with an original maturity of 90 days or less to be cash equivalents.
Employers’ accounting for defi ned benefi t pension and
other postretirement plans
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers’ Accounting for
Defi ned Benefi t Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)
(SFAS No. 158). SFAS No. 158 requires the Company to recognize the
overfunded or underfunded status of a defi ned benefi t
postretirement plan as an asset or liability in the Consolidated
balance sheet and to recognize changes in that funded status
in the year changes occur through other comprehensive
income. The Company adopted the applicable provisions of
SFAS No. 158 effective December 31, 2006, as required, which
resulted in a net adjustment to other comprehensive income
of $89.0 million for a limited number of applicable international
markets. In 2007, the Company recorded an unrecognized
actuarial gain, net of tax, of $51.3 million in other comprehensive
income.
Sabbatical leave
In certain countries, eligible employees are entitled to take a
paid sabbatical after a predetermined period of service. In June
2006, the FASB ratifi ed Emerging Issues Task Force Issue 06-2,
Accounting for Sabbatical Leave and Other Similar Benefi ts Pursu-
ant to FASB Statement No. 43, Accounting for Compensated
Absences (EITF 06-2). Under EITF 06-2, compensation costs
associated with a sabbatical should be accrued over the requi-
site service period, assuming certain conditions are met.
Previously, the Company expensed sabbatical costs as in-
curred. The Company adopted EITF 06-2 effective January 1, 2007,
as required and accordingly, we recorded a $36.1 million cumu-
lative adjustment, net of tax, to decrease beginning retained
earnings in the fi rst quarter 2007. The annual impact to
earnings of this accounting change is not signifi cant.
Fair value measurements
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements
(SFAS No. 157). SFAS No. 157 defi nes fair value, establishes a
framework for measuring fair value in accordance with generally ac-
cepted accounting principles, and expands disclosures about
fair value measurements. This statement does not require
any new fair value measurements; rather, it applies to other
accounting pronouncements that require or permit fair value
measurements. The provisions of SFAS No. 157, as issued, are
effective January 1, 2008. However, in February 2008, the FASB
deferred the effective date of SFAS No. 157 for one year for
certain non-fi nancial assets and non-fi nancial liabilities, except
those that are recognized or disclosed at fair value in the
fi nancial statements on a recurring basis (i.e., at least annually).
We adopted the required provisions of SFAS No. 157 related to
debt and derivatives as of January 1, 2008. The annual impact
of this accounting change is not expected to be signifi cant.
Fair value option
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS No. 159). SFAS
No. 159 permits entities to voluntarily choose to measure many
fi nancial instruments and certain other items at fair value. SFAS
No. 159 is effective beginning January 1, 2008. The Company
has decided not to adopt this optional standard.
Business combinations
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141(R), Business Combinations
(SFAS No. 141(R)). SFAS No. 141(R) requires the acquiring
entity in a business combination to record all assets acquired
and liabilities assumed at their respective acquisition-date fair
values, changes the recognition of assets acquired and liabilities
assumed arising from preacquisition contingencies, and requires
the expensing of acquisition-related costs as incurred. SFAS
No. 141(R) applies prospectively to business combinations for
which the acquisition date is on or after January 1, 2009. We
do not expect the adoption of SFAS No. 141(R) to have a signifi -
cant impact on our consolidated fi nancial statements.
Noncontrolling interests
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements (an amendment of Account-
ing Research Bulletin (ARB 51)) (SFAS No. 160). SFAS No.
160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 becomes effec-
tive beginning January 1, 2009 and is required to be adopted
prospectively, except for the reclassifi cation of noncontrolling
interests to equity and the recasting of net income (loss) attribut-
able to both the controlling and noncontrolling interests, which
are required to be adopted retrospectively. We do not expect
the adoption of SFAS No. 160 to have a signifi cant impact on
our consolidated fi nancial statements.
PROPERTY AND EQUIPMENT
Net property and equipment consisted of:
IN MILLIONS December 31, 2007 2006
Land $ 4,836.6 $ 4,443.2
Buildings and improvements
on owned land 11,306.6 10,392.8
Buildings and improvements
on leased land 10,962.6 10,191.5
Equipment, signs and seating 4,558.2 4,213.3
Other 539.7 482.1
32,203.7 29,722.9
Accumulated depreciation
and amortization (11,219.0) (10,284.8)
Net property and equipment $ 20,984.7 $ 19,
438 .1
Depreciation and amortization expense related to continuing
operations was (in millions): 2007-$1,145.0; 2006-$1,146.3;
2005-$1,124.8.
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