Wendy's 2009 Annual Report Download - page 111

(d) These consist of investments in certain non-current cost investments. The fair values of these investments
were based entirely on statements of account received from investment managers or investees which are
principally based on quoted market or broker/dealer prices. To the extent that some of these investments,
including the underlying investments in investment limited partnerships, do not have available quoted
market or broker/dealer prices, the Company relies on valuations performed by the investment managers or
investees in valuing those investments or third-party appraisals.
(e) It was not practicable to estimate the fair value of this cost investment because the investment was non-
marketable.
(f) The fair values were estimated by the Company based on information provided by the bank counterparties
that is model-driven and whose inputs are observable or whose significant value drivers are observable.
(g) The fair values were determined by discounting the future scheduled principal payments using an interest
rate assuming the same original issuance spread over a current Treasury bond yield for securities with
similar durations.
(h) The fair value was assumed to reasonably approximate the carrying amount since the carrying amount
represents the fair value as of the acquisition date of these lease obligations (2005) less subsequent
amortization.
(i) Our interest in AmeriGas Eagle Propane, L.P. was sold in 2009 and the related contingent liability was
eliminated.
(j) Wendy’s provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt
facility arrangements for new store development and equipment financing. Wendy’s has accrued a liability
for the fair value of these guarantees, the calculation for which was based upon a weighed average risk
percentage established at the inception of each program.
The carrying amounts of current accounts and notes receivable and non-current notes receivable (excluding
the DFR Notes described above) approximated fair value due to the related allowance for doubtful accounts and
notes receivable. The carrying amounts of accounts payable and accrued expenses and advertising funds
restricted assets and liabilities approximated fair value due to the short-term maturities of those items.
Valuation techniques under the accounting guidance related to fair value measurements are based on
observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent
sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the
following hierarchy:
Level 1 Inputs—Quoted prices for identical assets or liabilities in active markets.
Level 2 Inputs—Quoted prices for similar assets or liabilities in active markets; quoted prices for identical
or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs
are observable or whose significant value drivers are observable.
Level 3 Inputs—Pricing inputs are unobservable for the assets or liabilities and include situations where
there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair
value require significant management judgment or estimation.
The following table presents our financial assets and liabilities (other than cash and cash equivalents)
measured at fair value on a recurring basis as of January 3, 2010 by the valuation hierarchy as defined in the
fair value guidance:
January 3,
2010 Level 1 Level 2 Level 3
Fair Value Measurements
Short-term investment (included in “Prepaid expenses and other
current assets”)................................................. $ 263 $263 $ — $—
Interest Rate Swaps (included in “Deferred costs and other assets”) . . . . 1,589 — 1,589 —
Total................................................... $1,852 $263 $1,589 $—
104
Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)