Wendy's 2013 Annual Report Download - page 72

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
We believe that our vulnerability to risk concentrations in our cash equivalents is mitigated by (1) our policies
restricting the eligibility, credit quality and concentration limits for our placements in cash equivalents and
(2) insurance from the Securities Investor Protection Corporation of up to $500 per account, as well as supplemental
private insurance coverage maintained by substantially all of our brokerage firms, to the extent our cash equivalents
are held in brokerage accounts.
Accounts and Notes Receivable
Accounts and notes receivable consist primarily of royalties, franchise fees, rents due principally from
franchisees and credit card receivables. The need for an allowance for doubtful accounts is reviewed on a specific
identification basis based upon past due balances and the financial strength of the obligor.
Inventories
The Company’s inventories are stated at the lower of cost or market, with cost determined in accordance with
the first-in, first-out method and consist primarily of restaurant food items and paper supplies.
Investments
The Company has a 50% share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”)
with Tim Hortons Inc. (“THI”) and has significant influence over the investee. Such investment is accounted for
using the equity method, under which our results of operations include our share of the income of the investee.
Investments in limited partnerships and other non-current investments in which the Company does not have
significant influence over the investees, which includes our indirect 18.5% interest in Arby’s Restaurant Group, Inc.
(“Arby’s”), are recorded at cost with related realized gains and losses reported as income or loss in the period in which
the securities are sold or otherwise disposed. Cash distributions and dividends received that are determined to be
returns of capital are recorded as a reduction of the carrying value of our investments.
The difference between the carrying value of our TimWen equity investment and the underlying equity in the
historical net assets of the investee is accounted for as if the investee were a consolidated subsidiary. Accordingly, the
carrying value difference is amortized over the estimated lives of the assets of the investee to which such difference
would have been allocated if the equity investment were a consolidated subsidiary. To the extent the carrying value
difference represents goodwill, it is not amortized.
Properties and Depreciation and Amortization
Properties are stated at cost, including internal costs of employees to the extent such employees are dedicated to
specific restaurant construction projects, less accumulated depreciation and amortization. Depreciation and
amortization of properties is computed principally on the straight-line basis using the following estimated useful lives
of the related major classes of properties: 5 to 20 years for office and restaurant equipment, 3 to 15 years for
transportation equipment and 7 to 30 years for buildings and improvements. When the Company commits to a plan
to cease using certain properties before the end of their estimated useful lives, depreciation expense is accelerated to
reflect the use of the assets over their shortened useful lives. Capital leases and leasehold improvements are amortized
over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by
renewal options that the Company is reasonably assured of exercising.
The Company reviews properties for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be recoverable. If such review indicates an asset group may not be
recoverable, an impairment loss is recognized for the excess of the carrying amount over the fair value of an asset
group to be held and used or over the fair value less cost to sell of an asset to be disposed. Asset groups are primarily
comprised of our individual restaurant properties.
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