Wendy's 2012 Annual Report Download - page 69

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Fiscal Year
The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to
December 31 and are referred to herein as (1) “the year ended December 30, 2012” or “2012,” (2) “the year ended
January 1, 2012” or “2011,” and (3) “the year ended January 2, 2011” or “2010,” all of which consisted of 52 weeks.
Cash Equivalents
All highly liquid investments with a maturity of three months or less when acquired are considered cash
equivalents. The Company’s cash equivalents principally consist of cash in bank and money market mutual fund
accounts and are primarily not in Federal Deposit Insurance Corporation insured accounts.
We believe that our vulnerability to risk concentrations in our cash equivalents is mitigated by (1) our policies
restricting the eligibility, credit quality and concentration limits for our placements in cash equivalents and
(2) insurance from the Securities Investor Protection Corporation of up to $500 per account, as well as supplemental
private insurance coverage maintained by substantially all of our brokerage firms, to the extent our cash equivalents
are held in brokerage accounts.
Accounts and Notes Receivable
Accounts and notes receivable consist primarily of royalties, franchise fees, rents due principally from
franchisees and credit card receivables. The need for an allowance for doubtful accounts is reviewed on a specific
identification basis based upon past due balances and the financial strength of the obligor.
Inventories
The Company’s inventories are stated at the lower of cost or market, with cost determined in accordance with
the first-in, first-out method and consist primarily of restaurant food items and paper supplies.
Investments
Investments in which the Company has significant influence over the investees include (1) a 50% share in a
partnership in a Canadian restaurant real estate joint venture (“TimWen”) with Tim Hortons Inc. (“THI”) and (2) a
49% share in a joint venture for the operation of Wendy’s restaurants in Japan (the “Japan JV”). Such investments are
accounted for using the equity method, under which results of operations include our share of the income or loss of
the investees. Investments in limited partnerships and other non-current investments in which the Company does not
have significant influence over the investees, which includes our indirect 18.5% interest in Arby’s Restaurant Group,
Inc. (“Arby’s”), are recorded at cost with related realized gains and losses reported as income or loss in the period in
which the securities are sold or otherwise disposed.
The difference between the carrying value of our TimWen equity investment and the underlying equity in the
historical net assets of the investee is accounted for as if the investee were a consolidated subsidiary. Accordingly, the
carrying value difference is amortized over the estimated lives of the assets of the investee to which such difference
would have been allocated if the equity investment were a consolidated subsidiary. To the extent the carrying value
difference represents goodwill, it is not amortized.
The Company reviews investments with unrealized losses and recognizes investment losses for any unrealized
losses deemed to be other than temporary. These investment losses are recognized as a component of “Net income
(loss).” The Company considers such factors as the length of time the market value of an investment has been below
its carrying value, the severity of the decline, the financial condition of the investee and the prospect for future
recovery in the market value of the investment, including the Company’s ability and intent to hold the investments
for a period of time sufficient for a forecasted recovery. The cost-basis component of investments represents original
cost less a permanent reduction for any unrealized losses that were deemed to be other than temporary.
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