In May 2014, the FASB issued ASU 2014-09, Revenue Recognition - Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which provides a comprehensive new revenue recognition model that requires an entity to recognize revenue in an amount that reflects the consideration the entity 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. We adopted the new standard on October 1, 2018 using the modified retrospective method, whereby the cumulative effect of this transition to applicable contracts with customers that were not completed as of October 1, 2018 was recorded as an adjustment to beginning retained earnings as of this date. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The new revenue recognition standard did not impact our recognition of restaurant sales, rental revenues, or royalty fees from franchisees. The new pronouncement changed the way initial fees from franchisees for new restaurant openings or new franchise terms are recognized. Under the previous revenue recognition guidance, initial franchise fees were recognized as revenue at the time when a new restaurant opened or at the start of a new franchise term. In accordance with the new guidance, the initial franchise services are not distinct from the continuing rights and services offered during the term of the franchise agreement and will therefore be treated as a single performance obligation together with the continuing rights and services. As such, initial fees received will be recognized over the franchise term and any unamortized portion will be recorded as deferred revenue in our condensed consolidated balance sheet. An adjustment to opening retained earnings and a corresponding contract liability of approximately $50.3 million (of which $5.0 million was current and $45.3 million was long-term) was established on the date of adoption. A deferred tax asset of approximately $13.0 million related to this contract liability was also established on the date of adoption.

The new standard also had an impact on transactions presented net and not included in our revenues and expenses such as franchisee contributions to and expenditures from our advertising fund, and sourcing and technology fee contributions from franchisees and the related expenses. We determined that we are the principal in these arrangements, and as such, contributions to and expenditures from the advertising fund, and sourcing and technology fees and expenditures are now reported on a gross basis within our consolidated statements of earnings. While this change materially impacted our gross amount of reported revenues and expenses, the impact will be largely offsetting with no material impact to our reported net earnings. However, any annual surplus or deficit in the marketing fund will impact income from operations and net income.

The following table summarizes the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statement as of and for the 16-weeks ended January 20, 2019 (in thousands):



				Adjustments
	As Reported			Franchise Fees			Marketing and Sourcing Fees			Technology Support Fees			Balances without Adoption
Condensed Consolidated Statement of Earnings
Sixteen Weeks Ended January 20, 2019
Franchise royalties and other	$	52,250		$	(1,092	)	$	—		$	—		$	51,158
Franchise contributions for advertising and other services	$	51,814		$	—		$	(49,097	)	$	(2,717	)	$	—
Total revenues	$	290,786		$	(1,092	)	$	(49,097	)	$	(2,717	)	$	237,880
Franchise advertising and other services expenses	$	54,270		$	—		$	(49,097	)	$	(5,173	)	$	—
Selling, general and administrative expenses	$	24,083		$	—		$	—		$	2,456		$	26,539
Total operating costs and expenses, net	$	232,462		$	—		$	(49,097	)	$	(2,717	)	$	180,648
Earnings from operations	$	58,324		$	(1,092	)	$	—		$	—		$	57,232
Earnings from continuing operations and before income taxes	$	40,494		$	(1,092	)	$	—		$	—		$	39,402
Income taxes	$	9,373		$	(282	)	$	—		$	—		$	9,091
Earnings from continuing operations	$	31,121		$	(810	)	$	—		$	—		$	30,311
Net earnings	$	34,098		$	(810	)	$	—		$	—		$	33,288

Condensed Consolidated Balance Sheet
January 20, 2019
Prepaid expenses	$	10,367		$	282		$	—		$	—		$	10,649
Total current assets	$	96,546		$	282		$	—		$	—		$	96,828
Deferred tax assets	$	77,295		$	(12,958	)	$	—		$	—		$	64,337
Other assets, net	$	199,462		$	269		$	—		$	—		$	199,731
Total other assets	$	324,015		$	(12,689	)	$	—		$	—		$	311,326
Total assets	$	828,852		$	(12,407	)	$	—		$	—		$	816,445
Accrued liabilities	$	100,429		$	(4,963	)	$	—		$	—		$	95,466
Total current liabilities	$	187,656		$	(4,963	)	$	—		$	—		$	182,693
Other long-term liabilities	$	234,816		$	(43,962	)	$	—		$	—		$	190,854
Total long-term liabilities	$	1,248,492		$	(43,962	)	$	—		$	—		$	1,204,530
Retained earnings	$	1,547,759		$	36,518		$	—		$	—		$	1,584,277
Total stockholders’ deficit	$	(607,296	)	$	36,518		$	—		$	—		$	(570,778	)
Total liabilities and stockholders’ deficit	$	828,852		$	(12,407	)	$	—		$	—		$	816,445

The adoption of ASC 606 had no impact on the Company’s cash provided by or used in operating, investing or financing activities as previously reported in its condensed consolidated statement of cash flows.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This standard requires the presentation of the service cost component of net benefit cost to be in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. All other components of net benefit cost should be presented separately from the service cost component and outside of a subtotal of earnings from operations, or separately disclosed. We adopted this standard in the first quarter of fiscal 2019 applying the retrospective method. As a result of the adoption, $0.6 million of pension costs previously reported within “Selling, general, and administrative expenses” has been reclassified to a separate line under earnings from operations to conform to current year presentation.