Notes To financial Statement

NATURE OF BUSINESS

The Company franchises and operates McDonald’s restaurants in the global restaurant industry. The
total systemwide restaurants in 2018 is 30,855, in 2019 is 38,695 and in 2020 is 39,198.

Basis of presentation

Prior to January 1, 2020, the Company presented both expenditures and receipts.

Effectively on January 1, 2020, the Company is presenting the revenues and expenses.

Consolidation

The Company has concluded that consolidation of any such entities is not appropriate for the periods
presented. Investments in affiliates owned 50% or less (primarily McDonald's China and Japan) are
accounted for by the equity method, with no scope exception under the variable interest entity
consolidation guidance.

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of financial statements in conformity with accounting principles generally accepted in
the U.S. requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes.

FOREIGN CURRENCY TRANSLATION

Generally, the functional currency of operations outside the U.S. is the respective local currency.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements Financial Instruments - Credit Losses

Recent Accounting Pronouncements Not Yet Adopted Income Taxes

Reference Rate Reform

REVENUE RECOGNITION

The Company's revenues consist of sales by Company-operated restaurants and fees from restaurants
operated by franchisees, and affiliates. Revenues from conventional franchised restaurants include rent
and royalties.

PROPERTY AND EQUIPMENT

Property and equipment are listed in accordance with industry practice.

LEASING

The Company is the lessee in a significant real estate portfolio. The Lease right-of-use assetand Lease
liability reflect the present value of the Company's estimated future minimum lease payments over the
lease term, which includes options that are reasonably assured of being exercised.
CAPITALIZED SOFTWARE

Capitalized software is stated at cost and amortized using the straight-line method over the estimated
useful life of the software, which primarily ranges from 2 to 7 years

LONG-LIVED ASSETS

McDonald's stores are managed as a group with significant common costs and promotional activities.
Long-lived assets are reviewed for impairment annually in the fourth quarter. Loss is measured by the
excess of the carrying amount of each individual restaurant over fair value as determined by an estimate
of discounted future cash flows.

GOODWILL

The following table presents the 2020 activity in goodwill by segment:

ADVERTISING COSTS

The decrease in 2020 is due to lower sales in the International Operated Markets as a result of COVID-
19.

INCOME TAXES

Tax liabilities are recorded when, in management'sjudgment, a tax position does not meet the more
likely than not threshold for recognition. The Company records interest and penalties on unrecognized
tax benefits in the provision for income. Tax assessments can arise several years after tax returns have
been filed.