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Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended
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Jun. 30, 2023
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 (the "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 22, 2022. The Condensed Consolidated Balance Sheet as of September 30, 2022 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 intercompany transactions and accounts have been eliminated. Aramark's Intention to Spin-off Uniform Segment On May 10, 2022, the Company announced its intention to spin-off its Uniform segment into an independent publicly traded company to Aramark’s stockholders. The proposed spin-off is intended to be a tax-free transaction to Aramark and its stockholders for United States federal income tax purposes. The proposed spin-off is expected to be completed near the end of fiscal 2023, subject to certain customary conditions, including final approval of the Aramark Board of Directors, receipt of a favorable opinion and Internal Revenue Service ruling with respect to the tax-free nature of the transaction, the effectiveness of a registration statement on Form 10 to be filed with the SEC and the receipt of other regulatory approvals. New Accounting Standards Updates Adopted Standards (from most to least recent date of issuance) In December 2022, the Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") which defers the sunset date of Topic 848, Reference Rate Reform, to December 31, 2024 from December 31, 2022 and is effective for the Company upon issuance of the ASU. In January 2021, the FASB issued an ASU, which clarified certain optional expedients and exceptions for contract modifications and hedge accounting that may apply to derivatives that are affected by the discontinuance of the London Interbank Offer Rate ("LIBOR") and the reference rate reform standard. In March 2020, the FASB issued an ASU which provided optional expedients that may be applied to assist with the discontinuance of LIBOR. The expedients allowed 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 fiscal 2020, the Company applied 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 rate reform. During the third quarter of fiscal 2023, the Company applied the optional expedient related to assessment of effectiveness, whereas the Company elected to continue the method of assessing effectiveness as documented in the original hedge documentation and elected to apply the optional expedient so that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. The Company may apply the optional expedients of this standard through December 31, 2024. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements. In November 2021, the FASB issued an ASU which requires an entity to provide certain annual disclosures when they have received government assistance. The guidance was effective for the Company in the first quarter of fiscal 2023. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements. Standards Not Yet Adopted (from most to least recent date of issuance) In September 2022, the FASB issued an ASU to enhance the transparency of supplier finance programs, which may be referred to as reverse factoring, payables finance or structured payables arrangements. The guidance will require that a buyer in a supplier finance program disclose the program's nature, activity and potential magnitude. The guidance is effective for the Company in the first quarter of fiscal 2024 and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements. In October 2021, the FASB issued an ASU which required that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") as if it had originated the contracts. The guidance is effective for the Company in the first quarter of fiscal 2024 and early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the condensed consolidated financial statements. Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements. Comprehensive Income Comprehensive income includes all changes to stockholders' equity during a period, except those resulting from investments by and distributions to stockholders. Components of comprehensive income include net income, pension plan adjustments (net of tax), changes in foreign currency translation 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 (net of tax). The summary of the components of comprehensive income is as follows (in thousands):
| Three Months Ended
| June 30, 2023 |  | July 1, 2022
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net income |  |  | $ | 338,555 |  |  |  |  | $ | 40,481 |
Foreign currency translation adjustments | 8,353 |  | (2,676) |  | 5,677 |  |  | (54,183) |  | 3,807 |  | (50,376) |
Fair value of cash flow hedges | 23,825 |  | (6,195) |  | 17,630 |  |  | 18,765 |  | (4,879) |  | 13,886 |
Share of equity investee's comprehensive income | 11,126 |  | (4,918) |  | 6,208 |  |  | 632 |  | — |  | 632 |
Other comprehensive income (loss) | 43,304 |  | (13,789) |  | 29,515 |  |  | (34,786) |  | (1,072) |  | (35,858) |
Comprehensive income |  |  | 368,070 |  |  |  |  | 4,623 |
Less: Net income attributable to noncontrolling interests |  |  | 71 |  |  |  |  | 152 |
Comprehensive income attributable to Aramark stockholders |  |  | $ | 367,999 |  |  |  |  | $ | 4,471 |
| Nine Months Ended
| June 30, 2023 |  | July 1, 2022
| Pre-Tax Amount | Tax Effect | After-Tax Amount |  | Pre-Tax Amount | Tax Effect | After-Tax Amount
Net income |  |  | $ | 468,088 |  |  |  |  | $ | 118,733 |
Pension plan adjustments | — |  | — |  | — |  |  | 2,480 |  | (701) |  | 1,779 |
Foreign currency translation adjustments | 56,080 |  | (5,410) |  | 50,670 |  |  | (58,114) |  | 7,040 |  | (51,074) |
Fair value of cash flow hedges | (14,736) |  | 3,831 |  | (10,905) |  |  | 145,096 |  | (37,725) |  | 107,371 |
Share of equity investee's comprehensive income | 10,616 |  | (4,918) |  | 5,698 |  |  | 1,327 |  | — |  | 1,327 |
Other comprehensive income | 51,960 |  | (6,497) |  | 45,463 |  |  | 90,789 |  | (31,386) |  | 59,403 |
Comprehensive income |  |  | 513,551 |  |  |  |  | 178,136 |
Less: Net (loss) income attributable to noncontrolling interests |  |  | (588) |  |  |  |  | 45 |
Comprehensive income attributable to Aramark stockholders |  |  | $ | 514,139 |  |  |  |  | $ | 178,091 |
Accumulated other comprehensive loss consists of the following (in thousands):
| June 30, 2023 |  | September 30, 2022
Pension plan adjustments | $ | (7,210) |  |  | $ | (7,210) |
Foreign currency translation adjustments | (162,718) |  |  | (213,388) |
Cash flow hedges | 103,820 |  |  | 114,725 |
Share of equity investee's accumulated other comprehensive loss | — |  |  | (5,698) |
| $ | (66,108) |  |  | $ | (111,571) |
Currency Translation Beginning in 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. The impact of the Argentina remeasurement was a foreign currency transaction loss of $2.8 million and $6.7 million during the three and nine month periods ended June 30, 2023, respectively. The impact of the Argentina remeasurement was a foreign currency transaction loss of $1.2 million and $2.2 million during the three and nine month periods ended July 1, 2022, respectively. The impact of foreign currency transaction gains and losses exclusive of Argentina's operations included in the Company's operating results during the three and nine month periods of both fiscal 2023 and 2022 were immaterial to the condensed consolidated financial statements. Current Assets The Company insures portions of its risk in general liability, automobile liability, workers’ compensation liability and property liability through a wholly owned captive insurance subsidiary (the "Captive"), to enhance its risk financing strategies. The Captive is subject to regulations within its domicile of Bermuda, including regulations established by the Bermuda Monetary Authority (the "BMA") relating to levels of liquidity and solvency as such concepts are defined by the BMA. The Captive was in compliance with these regulations as of June 30, 2023. 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 payment of its general liability, automobile liability, workers' compensation liability, property liability and related Captive costs. As of June 30, 2023 and September 30, 2022, cash and cash equivalents at the Captive were $24.4 million and $23.1 million, respectively. During fiscal 2022, the Captive began investing a portion of its cash and cash equivalents in United States Treasury securities to improve returns on the Captive's assets. The amount of this investment as of June 30, 2023 and September 30, 2022 was $109.8 million and $78.2 million, respectively, and recorded in "Prepayments and other current assets" on the Condensed Consolidated Balance Sheets. Property and Equipment and Operating Lease Right-of-use Assets During the first half of fiscal 2023, the Company completed a strategic review of certain administrative locations, taking into account facility capacity and current utilization, among other factors. Based on this review, the Company vacated or otherwise reduced its usage at certain of these locations, resulting in an analysis of the recoverability of the assets associated with the locations. As a result, for the nine months ended June 30, 2023, the Company recorded an impairment charge of $26.7 million within its FSS United States and Uniform segments, which is included in "Cost of services provided (exclusive of depreciation and amortization)" on the Condensed Consolidated Statements of Income. For the nine months ended June 30, 2023, the non-cash impairment charges within the FSS United States segment consisted of operating lease right-of-use assets of $8.6 million and property and equipment of $10.4 million. For the nine months ended June 30, 2023, the non-cash impairment charges within the Uniform segment consisted of operating lease right-of-use assets of $7.1 million and other costs of $0.6 million. Other Assets Other assets consist primarily of costs to obtain or fulfill contracts, including employee sales commissions and rental merchandise in-service, long-term receivables, investments in 50% or less owned entities and computer software costs. For investments in 50% or less owned entities accounted for under the equity method of accounting, the carrying amount as of June 30, 2023 and September 30, 2022 was $98.0 million and $224.5 million, respectively. On April 6, 2023, the Company sold its 50% ownership interest in AIM Services Co., Ltd., a leading Japanese food services company, to Mitsui & Co., Ltd. for $535.0 million in cash in a taxable transaction resulting in a pre-tax gain on sale of this equity investment of $377.1 million ($275.9 million net of tax) during the three and nine months ended June 30, 2023. The pre-tax gain is included in "Gain on Sale of Equity Investments, net" on the Condensed Consolidated Statements of Income. 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 as of June 30, 2023 and September 30, 2022 was $85.2 million and $180.5 million, respectively. On May 16, 2023, the Company sold a portion of its ownership interest in an equity investment for $98.2 million in cash in a taxable transaction resulting in a pre-tax loss on sale of this equity investment of $1.1 million ($2.2 million net of tax) during the three and nine months ended June 30, 2023. The pre-tax loss is included in "Gain on Sale of Equity Investments, net" on the Condensed Consolidated Statements of Income. Other Current and Noncurrent Liabilities The Company is self-insured for obligations related to certain risks that are retained under the Company's casualty program, which includes general liability, automobile liability and workers' compensation liability, as well as for property liability and employee healthcare benefit programs. Reserves for retained costs associated with the casualty program are estimated through actuarial methods, with the assistance of third-party actuaries, using loss development assumptions based on the Company's claims history. Impact of COVID-19 The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") provided for deferred payment of the employer portion of social security taxes through the end of calendar 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% of the amount due December 31, 2022. Approximately $64.2 million of the deferred social security taxes were paid during both the nine months ended June 30, 2023 and July 1, 2022.

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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 -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205/tableOfContent + Details
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