Wendy's 2009 Annual Report Download - page 39

(2) Selected financial data reflects the changes related to the adoption of the following accounting standards:
(a) As of January 1, 2007, we utilized 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. We utilized 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. However, there was a net reduction of $2.3 in stockholders’ equity as
of January 1, 2007.
(b) As of January 1, 2007, the Company accounted for scheduled major aircraft maintenance overhauls in
accordance with the direct expensing method under which the actual cost of such overhauls was 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. The Company credited $0.6 and $0.7 to operating profit and $0.4 and $0.5 to income
from continuing operations and net income for 2006 and 2005, respectively.
(c) As of January 2, 2006, the Company measured 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 common
stock 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. There was no effect from the adoption of this new accounting methodology on the financial
statements for all periods presented prior to the accounting change.
(d) As of December 29, 2008, the Company adopted new accounting guidance related to non-controlling
interests (formerly referred to as minority interests). This adoption resulted in the retrospective
reclassification of minority interests from its former presentation as a liability to “Stockholder’s equity.”
The reclassifications were $0.l, $0.9, $14.2 and $43.4 for 2008, 2007, 2006 and 2005 respectively.
Additionally, in accordance with the new guidance, the loss from continuing operations in 2006 and 2005
excludes the effect of income attributable to non-controlling interests of $11.5 and $8.8, respectively.
Income attributable to non-controlling interests in 2008 and 2007 was not material.
(3) For the purposes of calculating income per share amounts for 2007, net income was allocated between the
shares of the Company’s 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 all years through
2008 was allocated equally between Common Stock and Class B common stock.
(4) The number of shares used in the calculation of diluted income per share in 2009 and 2007 consist of the
weighted average common shares outstanding for each class of common stock and potential shares of
common stock reflecting the effect of 483 dilutive stock options and nonvested restricted shares for 2009
and 129 for the Company’s common stock and 759 for the Company’s Class B common stock for 2007.
The number of shares used in the calculation of diluted income (loss) per share is the same as basic income
(loss) per share for 2008, 2006 and 2005 since all potentially dilutive securities would have had an
antidilutive effect based on the loss from continuing operations for these years.
(5) Reflects significant charges recorded in 2009 of $82.1 million charged to operating profit for impairment
of long-lived assets other than goodwill and $50.9 million charged to income from continuing operations
and net income related to these charges.
(6) Reflects certain significant charges and credits recorded during 2008 as follows: $460.1 charged to
operating loss consisting of a goodwill impairment for the Arby’s Company-owned restaurant reporting
unit; $484.0 charged to loss from continuing operations and net loss representing the aforementioned
$460.1 charged to operating loss and other than temporary losses on investments of $112.7 partially offset
by $88.8 of income tax benefit related to the above charges.
(7) Reflects certain significant charges and credits recorded during 2007 as follows: $45.2 charged to operating
profit, consisting of facilities relocation and corporate restructuring costs of $85.4 less $40.2 from the gain
on sale of the Company’s interest in Deerfield; $16.6 charged to income from continuing operations and
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