Wendy's 2008 Annual Report Download - page 41

(2) Selected financial data reflects the changes related to the adoption of the following accounting standards:
(a) The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (“FIN 48”) as of January 1, 2007. FIN 48 clarifies how
uncertainties in income taxes should be reflected in financial statements in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a
recognition threshold and measurement attribute for financial statement recognition and measurement of
potential tax benefits associated with tax positions taken or expected to be taken in income tax returns.
FIN 48 prescribes a two-step process of evaluating a tax position, whereby an entity first determines if it
is more likely than not that a tax position will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on the technical merits of the position. A tax position that
meets the more-likely-than-not recognition threshold is then measured for purposes of financial statement
recognition as the largest amount of benefit that is greater than 50 percent likely of being realized upon
being effectively settled. There was no effect on the 2007 or prior period statements of operations upon
the adoption of FIN 48. However, there was a net reduction of $2.3 in stockholders’ equity as of January
1, 2007.
(b) The Company adopted FASB Board Staff Position No. AUG AIR-1, “Accounting for Planned Major
Maintenance Activities” (“FSP AIR-1”) as of January 1, 2007. As a result, the Company accounts for
scheduled major aircraft maintenance overhauls in accordance with the direct expensing method under
which the actual cost of such overhauls is recognized as expense in the period it is incurred. Previously,
the Company accounted for scheduled major maintenance activities in accordance with the accrue-in-
advance method under which the estimated cost of such overhauls was recognized as expense in periods
through the scheduled date of the respective overhaul with any difference between estimated and actual
cost recorded in results from operations at the time of the actual overhaul. In accordance with the
retroactive application of FSP AIR-1, the Company has credited (charged) $0.6, $0.7 and $(0.2) to
operating profit (loss) and $0.4, $0.5 and $(0.1) to income (loss) from continuing operations and net
income (loss) for 2006, 2005 and 2004, respectively.
(c) The Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which
revised SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) effective January 2,
2006. As a result, the Company now measures the cost of employee services received in exchange for an
award of equity instruments, including grants of employee stock options and restricted stock, based on the
fair value of the award at the date of grant. The Company previously used the intrinsic value method to
measure employee share-based compensation. Under the intrinsic value method, compensation cost for the
Company’s stock options was measured as the excess, if any, of the market price of the Company’s Class A
common stock (the “Class A Common Stock” or “Class A Common Shares”), and/or Class B common
stock, series 1 (the “Class B Common Stock” or “Class B Common Shares”), as applicable, at the date of
grant, or at any subsequent measurement date as a result of certain types of modifications to the terms of
its stock options, over the amount an employee must pay to acquire the stock. As the Company used the
modified prospective adoption method under SFAS 123(R), there was no effect from the adoption of this
standard on the financial statements for all periods presented prior to the adoption date.
(3) Income (loss) per share amounts for 2008 reflects the conversion of Triarc Companies, Inc. (“Triarc” and
the former name of Wendy’s/Arby’s Group, Inc.) Class B Common Stock into Wendy’s/Arby’s Class A
Common Stock (the “Conversion”) on September 29, 2008. In connection with the Wendy’s Merger,
Wendy’s/Arby’s stockholders approved a charter amendment to convert each of the then existing Triarc
Class B Common Stock into one share of Wendy’s/Arby’s Class A Common Stock. For the purposes of
calculating income per share, net income was allocated between the shares of the Company’s Class A
Common Stock and the Company’s Class B Common Stock based on the actual dividend payment ratio.
For the purposes of calculating loss per share, the net loss for any year was allocated equally through the
Conversion date.
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