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Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended
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Mar. 27, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Aramark (the "Company") is a leading global provider of food, facilities and uniform services to education, healthcare, business & industry and sports, leisure & corrections clients. The Company's core market is the United States, which is supplemented by an additional 18-country footprint. The Company operates its business in three reportable segments that share many of the same operating characteristics: Food and Support Services United States ("FSS United States"), Food and Support Services International ("FSS International") and Uniform and Career Apparel ("Uniform"). The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited consolidated financial statements, and the notes to those statements, included in the Company's Form 10-K filed with the SEC on November 26, 2019. The Condensed Consolidated Balance Sheet as of September 27, 2019 was derived from audited financial statements which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In the opinion of the Company, the statements include all adjustments, which are of a normal, recurring nature, required for a fair presentation for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for a full year, due to the seasonality of some of the Company's business activities and the possibility of changes in general economic conditions. The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling financial interest is maintained. All significant intercompany transactions and accounts have been eliminated. New Accounting Standards Updates Adopted Standards In March 2019, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") which provided clarification regarding three issues related to the lease recognition standard. The guidance was effective for the Company in the first quarter of fiscal 2020 when the lease accounting standard was adopted. See below for further discussion regarding the impact of this standard. In July 2018, the FASB issued two ASUs regarding the lease recognition standard. The guidance provided clarification on issues identified regarding the adoption of the standard, provided an additional transition method to adopt the standard and provided an additional practical expedient to lessors. The guidance was effective for the Company in the first quarter of fiscal 2020 when the lease accounting standard was adopted. See below for further discussion regarding the impact of this standard. In July 2018, the FASB issued an ASU which clarifies, corrects errors in or makes minor improvements to the Accounting Standards Codification. The guidance was effective for the Company either upon issuance or in the first quarter of fiscal 2020, depending on the amendment. There was no impact on the condensed consolidated financial statements related to the amendments that were effective upon issuance of the guidance. The Company adopted the remaining amendments of the pronouncement in the first quarter of fiscal 2020, which did not have a material impact on the condensed consolidated financial statements. In February 2018, the FASB issued an ASU which allows for the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The guidance was effective for the Company in the first quarter of fiscal 2020. The Company adopted the guidance in the first quarter of fiscal 2020, which did not have an impact on the condensed consolidated financial statements. The Company did not elect to reclassify the stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. In September 2017, the FASB issued an ASU to provide additional implementation guidance with respect to the lease accounting standard. The guidance was effective for the Company in the first quarter of fiscal 2020. The Company adopted the standard in the first quarter of fiscal 2020 in conjunction with the lease recognition standard. See below for further discussion regarding the impact of the lease accounting provisions related to this standard. In February 2016, the FASB issued an ASU requiring lessees to recognize most leases on their balance sheets as operating lease liabilities with corresponding operating lease right-of-use assets and to disclose key information about lease arrangements. Recognition of expense on the Condensed Consolidated Statements of (Loss) Income continues in a manner similar to previous guidance. The Company adopted this guidance on September 28, 2019 (first day of fiscal 2020). In connection with the new lease guidance, the Company completed a comprehensive review of its lease arrangements in order to determine the impact of this ASU on its consolidated financial statements and related disclosures. The Company identified and implemented appropriate changes to business processes, controls and systems to support recognition and disclosure under the new standard. The Company adopted Accounting Standards Codification 842 (“ASC 842” or the "new lease standard") using the modified retrospective transition approach with an adjustment that recognized "Operating Lease Right-of-use Assets," "Current operating lease liabilities" and "Noncurrent Operating Lease Liabilities" on the Condensed Consolidated Balance Sheets on September 28, 2019. Comparative period information and disclosures were not revised as a result of the recognition and measurement of leases. Adoption of the new lease standard resulted in the recognition of operating lease liabilities and associated operating lease right-of-use assets of approximately $416.1 million and $558.5 million, respectively, as of September 28, 2019 on the Condensed Consolidated Balance Sheets. The operating lease right-of-use assets include adjustments for deferred rent, tenant improvement allowances and prepaid rent, including $166.9 million of long-term prepaid rent as of September 28, 2019 associated with certain leases at client locations. There was no material impact to the Condensed Consolidated Statements of (Loss) Income or Condensed Consolidated Statements of Cash Flows as a result of adoption. See Note 8 for further information on the impact of adopting the new lease standard. Standards Not Yet Adopted (from most to least recent date of issuance) In March 2020, the FASB issued an ASU which provides optional expedients that may be adopted and applied through December 2022 to assist with the discontinuance of LIBOR. The expedients allow companies to ease the potential accounting burden when modifying contracts and hedging relationships that use LIBOR as a reference rate, if certain criteria are met. During the second quarter of fiscal 2020, the Company adopted the optional expedient to assert probability of forecasted hedged transactions occurring on its interest rate swap derivative contracts regardless of any expected contract modifications related to reference reform. Other optional expedients related to hedging relationships may be contemplated in the future resulting from reference rate reform. The Company is currently evaluating the impact of this standard on other contracts. In January 2020, the FASB issued an ASU which provides clarification and improvements to existing guidance related to accounting for certain equity securities upon the application or discontinuation of equity method accounting and the measurement of forward contracts and purchased options on certain securities. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company is currently evaluating the impact of this standard. In December 2019, the FASB issued an ASU which simplifies the accounting for income taxes and clarifies and amends existing income tax guidance. Impacted areas include intraperiod tax allocations, interim period taxes, deferred tax liabilities with outside basis differences, franchise taxes and transactions which result in the "step-up" of goodwill. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company is currently evaluating the impact of this standard. In November 2019, the FASB issued an ASU which provides clarification and improvements to existing guidance related to the credit losses on financial instruments standard. The Company will adopt this guidance in the first quarter of fiscal 2021 when the credit losses on financial instruments standard is adopted. The Company is currently evaluating the impact of this standard. In May 2019, the FASB issued an ASU which provides the option to irrevocably elect to apply the fair value measurement option on an instrument-by-instrument basis for certain financial instruments within the scope of the credit losses on financial instruments standard. The Company will adopt this guidance in the first quarter of fiscal 2021 when the credit losses on financial instruments standard is adopted. The Company is currently evaluating the impact of this standard. In April 2019, the FASB issued an ASU which provides clarification, error corrections and improvements to existing guidance related to the credit losses on financial instruments ASU issued in June 2016, the derivatives and hedging ASU issued in August 2017 and the financial instruments ASU issued in January 2016. The guidance related to the credit losses on financial instruments ASU and the financial instruments ASU will be adopted in the first quarter of fiscal 2021. The Company adopted the guidance related to derivatives and hedging in the first quarter of fiscal 2020, which did not have a material impact on the condensed consolidated financial statements. The Company is currently evaluating the impact of the remaining amendments of this standard. In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to defined benefit pension plans. The guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is permitted. The Company is currently evaluating the impact of this standard. In August 2018, the FASB issued an ASU which adds, modifies and removes several disclosure requirements related to fair value measurements. The Company will adopt this guidance in the first quarter of fiscal 2021. The Company is currently evaluating the impact of this standard. In June 2016, the FASB issued an ASU to require entities to account for expected credit losses on financial instruments including trade receivables. The Company will adopt this guidance in the first quarter of fiscal 2021. The Company is currently evaluating the impact of this standard. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income (loss) include net income (loss), changes in foreign currency translation adjustments (net of tax), pension plan adjustments (net of tax), changes in the fair value of cash flow hedges (net of tax) and changes to the share of any equity investees' comprehensive income (loss) (net of tax). The summary of the components of comprehensive income (loss) is as follows (in thousands):
| Three Months Ended |  |  |  |  |  |
| March 27, 2020 |  |  |  | March 29, 2019 |  |
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net (loss) income |  |  | $ | (202,021) |  |  |  |  | $ | 29,310 |
Pension plan adjustments | (286) |  | — |  | (286) |  |  | — |  | — |  | — |
Foreign currency translation adjustments | (41,579) |  | (314) |  | (41,893) |  |  | 8,842 |  | 131 |  | 8,973 |
Fair value of cash flow hedges | (89,083) |  | 23,162 |  | (65,921) |  |  | (23,851) |  | 6,173 |  | (17,678) |
Share of equity investee's comprehensive (loss) income | (145) |  | — |  | (145) |  |  | 50 |  | — |  | 50 |
Other comprehensive loss | (131,093) |  | 22,848 |  | (108,245) |  |  | (14,959) |  | 6,304 |  | (8,655) |
Comprehensive (loss) income |  |  | (310,266) |  |  |  |  | 20,655 |
Less: Net income (loss) attributable to noncontrolling interest |  |  | 239 |  |  |  |  | (43) |
Comprehensive (loss) income attributable to Aramark stockholders |  |  | $ | (310,505) |  |  |  |  | $ | 20,698 |
| Six Months Ended |  |  |  |  |  |
| March 27, 2020 |  |  |  | March 29, 2019 |  |
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net (loss) income |  |  | $ | (56,138) |  |  |  |  | $ | 279,988 |
Pension plan adjustments | (571) |  | — |  | (571) |  |  | 753 |  | — |  | 753 |
Foreign currency translation adjustments | (27,225) |  | (83) |  | (27,308) |  |  | (9,034) |  | — |  | (9,034) |
Fair value of cash flow hedges | (79,957) |  | 20,789 |  | (59,168) |  |  | (56,553) |  | 14,636 |  | (41,917) |
Share of equity investee's comprehensive income (loss) | 2 |  | — |  | 2 |  |  | (230) |  | — |  | (230) |
Other comprehensive loss | (107,751) |  | 20,706 |  | (87,045) |  |  | (65,064) |  | 14,636 |  | (50,428) |
Comprehensive (loss) income |  |  | (143,183) |  |  |  |  | 229,560 |
Less: Net income (loss) attributable to noncontrolling interest |  |  | 361 |  |  |  |  | (49) |
Comprehensive (loss) income attributable to Aramark stockholders |  |  | $ | (143,544) |  |  |  |  | $ | 229,609 |
Accumulated other comprehensive loss consists of the following (in thousands):
| March 27, 2020 |  | September 27, 2019
Pension plan adjustments | $ | (47,793) |  |  | $ | (47,222) |
Foreign currency translation adjustments | (155,427) |  |  | (128,119) |
Cash flow hedges | (90,224) |  |  | (31,056) |
Share of equity investee's accumulated other comprehensive loss | (10,566) |  |  | (10,568) |
| $ | (304,010) |  |  | $ | (216,965) |
Currency Translation During fiscal 2018, Argentina was determined to have a highly inflationary economy. As a result, the Company remeasures the financial statements of Argentina's operations in accordance with the accounting guidance for highly inflationary economies. During both the three and six month periods of fiscal 2020 and 2019, the impact of foreign currency transaction gains and losses were immaterial to the condensed consolidated financial statements. Current Assets Beginning in fiscal 2019, the Company began insuring portions of its general liability, automobile liability and workers’ compensation risks through a wholly owned captive insurance subsidiary (the "Captive"), to enhance its risk financing strategies. The Captive is subject to the regulations within its domicile, including regulations relating to levels of liquidity and solvency as such concepts are defined by the regulator. The Captive was in compliance with these regulations as of March 27, 2020. These regulations may have the effect of limiting the Company's ability to access certain cash and cash equivalents held by the Captive for uses other than for the payments of its general liability, automobile liability and workers' compensation claims and related Captive costs. As of March 27, 2020, cash and cash equivalents at the Captive was $68.7 million. The Company is self-insured for a portion of general liability, automobile liability and workers' compensation claims under its insurance arrangements. Self-insurance reserves are recorded based on actuarial analyses. Other Assets Other assets consist primarily of costs to obtain or fulfill contracts, including rental merchandise in-service, long-term receivables, investments in 50% or less owned entities, computer software costs and employee sales commissions. For investments in 50% or less owned entities, other than those accounted for under the equity method of accounting, the Company measures these investments at cost, less any impairment and adjusted for changes in fair value resulting from observable price changes for an identical or a similar investment of the same issuer due to the lack of readily available fair values related to those investments. The carrying amount of equity investments without readily determinable fair values at March 27, 2020 and September 27, 2019 was $42.5 million and $42.6 million, respectively.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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