Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include accounts of the Company and all subsidiaries. Investments representing 20% to 50% interests in companies are accounted for under the equity method.
All material intercompany transactions have been
The consolidated financial statements include net
assets in foreign countries of $12,806,000 at July 27,
1973, and $11,326,000 at July 28, 1972. Foreign sales
and net income, as a percent of consolidated sales
and net income, in 1973 were 10% and 11% and in
1972 were 9% and 11%, respectively.
Financial statements of foreign subsidiaries have
been translated into U. S. dollars as follows: liabilities
and current assets at year end rates; property, equipment and depreciation reserves and expense at historical rates; and sales and expenses (except depreciation) at the approximate average monthly rates. Net
results of translation of construction loans are credited
or charged to the related property account; other
gains or losses relating to translations and exchange
transactions are included in net income.
Interest on construction financing of $2,802,000 in
1973 and $1,612,000 in 1972 was capitalized as part
of the construction costs. See Note 4 for description
of accounting for construction financing.
During fiscal 1973, the Company began selling
condominium units. Sales of condominium units are
recorded when both parties are bound by terms of the
contract and all conditions precedent to closing have
been performed, including receipt of 25% down payment. On closing, the full purchase price is received
in cash. Cost of condominium sales, including costs of
units sold and related selling expenses, amounted to
Deferred income taxes are recorded for timing differences between book and taxable income, principally depreciation, interest during construction, and
deferred stock compensation. As a result of a Revenue
Agent's Report received in 1973, several differences
between book and tax income were eliminated. This
has caused a reduction in deferred income taxes and
in the deferred portion of the provision for United
States taxes. In some foreign locations the tax rate is
lower than the effective tax rate in the United States.
Provision for United States taxes has not been made on
unremitted earnings of foreign subsidiaries as these
earnings are considered to be permanently invested.
The Company's approximate equity in unremitted
earnings of foreign subsidiaries, which are intended to
be permanently invested, aggregated $3,167,000 at
July 27, 1973. If this amount was distributed, United
States taxes would be reduced by a substantial foreign
Investment tax credits are on the "flow-through"
method, and are recognized in the year the related
property and equipment are placed in service.
U. S. income tax returns have been examined
Deferred Management Stock Compensation:
Compensation for deferred stock bonus awards is
recorded in the year in which the bonus is earned,
adjusted for anticipated forfeitures, and is based on
quoted market price at date awarded.
Computation of Earnings Per Share:
Earnings per share of common stock are based on
the weighted average number of shares of common
stock outstanding during each year, which was
30,163,544 for 1973 and 29,373,010 for 1972 (adjusted for 1973 21/2% stock dividend).
Conversion of subordinated debt and distribution of
shares reserved for warrant, stock purchase plans and
deferred stock compensation agreements would not
have a material effect on earnings per share.
Cost in Excess of Net Assets of Businesses Acquired:
Of the cost in excess of net assets of businesses
acquired, $11,277,627 relates to companies acquired
prior to October 31, 1970 and is not being amortized.
The remaining $3,752,651 is being amortized over
periods up to 40 years.
Costs incurred prior to the opening of certain
operations are deferred and amortized, following dates
of opening, as follows: hotels—three years; theme
parks—five years; and other major operations—one
year. Such expenses for smaller operations are expensed as incurred.
Deferred financing expenses are amortized over the
term of the loan. Deferred lease expenses are amortized over the term of the lease. Miscellaneous deferred
charges are amortized over periods up to 8 years.
Carrying costs on land not currently used in operations are capitalized as land cost.
Costs of developing data processing systems and
research and development costs are expensed as
Land Purchased for Resale or Future Operations:
In connection with the development of properties,
the Company often acquires extra land which is held
for later disposition. The cost of carrying these properties is capitalized if the estimated realizable value