Wendy's 2014 Annual Report Download - page 69

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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, LLC (“Wendy’s”)
and its subsidiaries (formerly known as Wendy’s International, Inc.). Wendy’s 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
27 foreign countries and U.S. territories. At December 28, 2014, Wendy’s operated and franchised 957 and 5,558
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 reports
“Net loss (income) attributable to noncontrolling interests,” separately in our consolidated statements of operations.
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.
Certain reclassifications have been made to prior year presentation to conform to the current year presentation.
During the year ended December 28, 2014, the Company began correctly recording rental income and lease
expense on a gross basis versus net to properly reflect Wendy’s subleasing of restaurant facilities to franchisees for the
operation of Wendy’s/Tim Hortons combo units in Canada. The Company’s previously reported rental income in
“Franchise revenues” and lease expense in “Other operating expense, net” for the years ended December 29, 2013 and
December 30, 2012 were both understated by $7,544 and $7,724, respectively. The effect of the offsetting
understatements on the consolidated statements of operations for the years ended December 29, 2013 and
December 30, 2012 was not material to franchise revenues or other operating expense, net and had no impact on
operating profit or net income.
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 28, 2014” or “2014,” (2) “the year ended
December 29, 2013” or “2013,” and (3) “the year ended December 30, 2012” or “2012,” all of which consisted of
52 weeks.
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