Wendy's 2008 Annual Report Download - page 105

effect on the Company’s consolidated financial position or results of operations in any of the years presented
since the exercises of share-based awards in those years resulted in excess tax benefits which could not be
currently recognized.
Treasury Stock
Common stock held in treasury is stated at cost. The cost of issuances of shares from treasury stock is
determined at average cost.
Costs of Business Acquisitions
Under SFAS No. 141, “Business Combinations”, (“SFAS 141”) the Company defers any costs incurred
relating to the pursuit of business acquisitions while the potential acquisition process is ongoing. If the
acquisition is successful, such costs are then included as a component of the purchase price of the acquired
entity. Whenever the Company decides it will no longer pursue a potential acquisition, any related deferred
costs are expensed at that time. During December 2007, the FASB issued SFAS No. 141 (revised 2007),
“Business Combinations” (“SFAS 141(R)”), which requires that, subsequent to the adoption date of the
standard, all such costs are to be expensed when incurred. SFAS 141(R) applies prospectively to the Company’s
business combinations occurring after December 28, 2008.
Foreign Currency Translation
At December 28, 2008, the Company had foreign operations in Canada as well as in 23 foreign countries
and U.S. territories. The functional currency of each foreign subsidiary is the respective local currency.
Financial statements of foreign subsidiaries are prepared in their functional currency then translated into
United States dollars. Assets and liabilities are translated at the exchange rate as of the balance sheet date and
revenues, costs, and expenses are translated at a monthly average exchange rate. Net gains or losses resulting
from the translation adjustment are charged or credited directly to the “Foreign currency translation
adjustment” component of “Accumulated other comprehensive income (loss)” in the accompanying
Consolidated Statements of Stockholders’ Equity.
Income Taxes
Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies how uncertainties in income taxes should be
reflected in financial statements in accordance with SFAS 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.
Wendy’s/Arby’s files a consolidated Federal income tax return, which includes its principal corporate
subsidiaries. As a result of the Wendy’s Merger, Wendy’s/Arby’s had an ownership change, as defined in the
Internal Revenue Code of 1986, as amended (the “Code”) as it became part of the Wendy’s consolidated group
as it’s new parent. As a result, Wendy’s/Arby’s had a short taxable year in 2008 ending on the date of the
Wendy’s Merger (see Note 14). The Company has provided for Federal income taxes on the income of
Deerfield through the date of the Deerfield Sale, and the income of the Opportunities Fund and the DM Fund
through their respective effective redemption dates, net of minority interests since, as limited liability
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
(Formerly Triarc Companies, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)