Wendy's 2008 Annual Report Download - page 103

equipment, 3 to 15 years for transportation equipment, 7 to 30 years for buildings and 7 to 20 years for owned
site improvements. Leased assets capitalized 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 believes it is reasonably assured of exercising.
Amortization of Intangibles and Deferred Costs
Goodwill, representing the excess of the cost of an acquired entity over the fair value of the acquired net
assets, is not amortized.
Other intangible assets are amortized on the straight-line basis using the following estimated useful lives
of the related classes of intangibles: the terms of the respective leases, including periods covered by renewal
options that the Company is reasonably assured of exercising, for favorable leases; 21 years for franchise
agreements, 1 to 5 years for costs of computer software, 20 years for reacquired rights under franchise
agreements, 15 years for trademarks with a definite life and distribution rights, except those acquired in the
Wendy’s Merger, and 3 to 8 years for non-compete agreements. Trademarks acquired in the Wendy’s Merger
have an indefinite life and are not amortized. Asset management contracts, through the date of the Deerfield
Sale, were amortized on the straight-line basis over their estimated lives of 5 to 27 years for CDO contracts and
15 years for contracts under which the Company managed investment funds
Deferred financing costs, original issue debt discount, and adjustments to fair value of debt for purchase
price adjustments related to the Wendy’s Merger (see Note 3) are amortized as interest expense over the lives of
the respective debt using the interest rate method.
See Note 9 for further information with respect to the Company’s intangible assets.
Impairments
Goodwill
The Company tests goodwill for impairment annually, or more frequently if events or changes in
circumstances indicate that the asset may be impaired, by comparing the fair value of each reporting unit,
using discounted cash flows or market multiples based on earnings, to the carrying value to determine if there
is an indication that a potential impairment may exist. If we determine that an impairment may exist, we then
measure the amount of the impairment loss as the excess, if any, of the carrying amount of the goodwill over
its implied fair value. In determining the implied fair value of the reporting unit’s goodwill, the Company
allocates the fair value of a reporting unit to all of the assets and liabilities of that unit as if the unit had been
acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the
reporting unit. The excess of the fair value of the unit over the amounts assigned to the assets and liabilities is
the implied fair value of goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Following the Wendy’s Merger, the Company operates in two business segments consisting of two
restaurant brands: (1) Wendy’s restaurant operations and (2) Arby’s restaurant operations. Each segment
includes Company-owned restaurants and franchise reporting units which are considered to be separate
reporting units for purposes of measuring goodwill impairment under SFAS 142.
See Notes 9 and 18 for further disclosure related to the Company’s Goodwill impairment.
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If such review indicates an asset may not
be recoverable, an impairment loss is recognized for the excess of the carrying amount over the fair value of an
asset to be held and used or over the fair value less cost to sell of an asset to be disposed.
95
Wendy’s/Arby’s Group, Inc. and Subsidiaries
(Formerly Triarc Companies, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)