Wendy's 2009 Annual Report Download - page 91

contingent rent (“Contingent Rent”), that require additional rental payments based upon restaurant sales
volume. Contingent rent is expensed each period as the liability is incurred.
Favorable and unfavorable lease amounts, when we purchase restaurants, are recorded as components of
“Other intangible assets” and “Other liabilities”, respectively, and are amortized to “Cost of sales”—both on a
straight-line basis over the remaining term of the leases. When the expected term of a lease, including early
terminations, is determined to be shorter than the original amortization period, the favorable or unfavorable
lease balance associated with the lease is adjusted to reflect the revised lease term and a gain or loss recognized.
Management, with the assistance of a valuation firm, makes certain estimates and assumptions regarding
each new lease agreement, lease renewal, and lease amendment, including, but not limited to property values,
market rents, property lives, discount rates, and probable term, all of which can impact (1) the classification
and accounting for a lease as capital or operating, (2) the rent holiday and/or escalations in payment that are
taken into consideration when calculating straight-line rent, (3) the term over which leasehold improvements
for each restaurant are amortized and (4) the values and lives of favorable and unfavorable leases. Different
amounts of depreciation and amortization, interest and rent expense would be reported if different estimates
and assumptions were used.
Non-controlling Interests
The Company adopted new accounting guidance related to non-controlling interests (formerly referred to
as minority interests) on the first day of fiscal 2009. This adoption resulted in the retrospective reclassification
of minority interests from its former presentation as a liability to “Stockholders’ equity.” As our non-
controlling interests are no longer significant ($25, $154 and $958 at the end of 2009, 2008 and 2007,
respectively), such amounts have not been separately disclosed within “Stockholders’ equity” but rather
included in “Additional paid in capital.” Further, net loss attributable to non-controlling interests ($28, $340
and $2,682 in 2009, 2008 and 2007, respectively) are insignificant for all periods presented and therefore have
not been separately disclosed but rather included in “Other income (expense), net.”
Accounting Standards Not Yet Adopted
In June 2009, the Financial Accounting Standards Board (the “FASB”) issued guidelines on the
consolidation of variable interest entities which alters how a company determines when an entity that is
insufficiently capitalized or not controlled through voting interests should be consolidated. A company has to
determine whether it should provide consolidated reporting of an entity based upon the entity’s purpose and
design and the parent company’s ability to direct the entity’s actions. The guidance is effective commencing
with our 2010 fiscal year. We do not expect adoption of this guidance to have a material impact on our
consolidated financial statements.
In January 2010, the FASB issued amendments to the existing fair value measurements and disclosures
guidance which requires new disclosures and clarifies existing disclosure requirements. The purpose of these
amendments is to provide a greater level of disaggregated information as well as more disclosure around
valuation techniques and inputs to fair value measurements. The guidance is effective commencing with our
2010 fiscal year. We do not expect adoption of this standard to have a material effect on our consolidated
financial statements.
(2) Acquisitions and Dispositions
Merger with Wendy’s International, Inc.
On September 29, 2008, we completed the Wendy’s Merger in an all-stock transaction in which Wendy’s
shareholders received a fixed ratio of 4.25 shares of Wendy’s/Arby’s Class A Common Stock for each share of
Wendy’s common stock owned. At September 28, 2008, there were 6,625 Wendy’s restaurants in operation in
the United States and in 21 other countries and U.S. territories. Of these restaurants, 1,404 were operated by
Wendy’s and 5,221 by Wendy’s franchisees.
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)