Wendy's 2012 Annual Report Download - page 68

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(1) Summary of Significant Accounting Policies
Corporate Structure
The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,”
“us,” or “our”) is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC
(“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, Inc. (“Wendy’s”),
which franchises and operates company-owned Wendy’s®quick service restaurants specializing in hamburger
sandwiches throughout North America (defined as the United States of America (“U.S.”) and Canada). Wendy’s also
has franchised restaurants in 26 foreign countries and U.S. territories. At December 30, 2012, Wendy’s operated and
franchised 1,427 and 5,133 restaurants, respectively.
The Company manages and internally reports its business geographically. The operation and franchising of
Wendy’s restaurants in North America comprises virtually all of our current operations and represents a single
reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not
material.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) and include all of the Company’s
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company participates in two national advertising funds established to collect and administer funds
contributed for use in advertising and promotional programs for company-owned and franchised restaurants. The
revenue, expenses and cash flows of such advertising funds are not included in the Company’s consolidated statements
of operations or consolidated statements of cash flows because the contributions to these advertising funds are
designated for specific purposes and the Company acts as an agent, in substance, with regard to these contributions.
The assets and liabilities of these funds are reported as “Advertising funds restricted assets” and “Advertising funds
restricted liabilities.”
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ materially from those estimates.
In our consolidated balance sheet as of January 1, 2012, we have corrected and reclassified $32,400 from
“Accrued expenses and other current liabilities” to “Other liabilities” to properly present the non-current portion of
certain self-insurance liabilities and $12,414 from “Deferred income tax benefit” included in current assets to
“Deferred income taxes” included in non-current liabilities for the related tax effect.
The advertising funds restricted assets and liabilities as of January 1, 2012 have been updated to reflect an
$875 correction in one of the fund’s presentation of its current assets and liabilities.
Certain other reclassifications have been made to prior year presentation to conform to the current year
presentation.
Our consolidated statement of operations and consolidated balance sheet for the year ended and as of
December 30, 2012, include adjustments which reflect corrections to prior years’ income taxes and depreciation of
properties. Corrections to prior years’ tax matters recorded in our 2012 fiscal year had the effect of increasing our
benefit from income taxes and decreasing our deferred income tax liability by $7,620 and $580 for income from
continuing operations and discontinued operations, respectively. Corrections to prior years’ depreciation of properties
had the effect of increasing our 2012 fiscal year “Depreciation and amortization” and decreasing “Properties” by
$4,000.
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