Wendy's International (WEN)

5. Acquisitions

During 2004 and 2005, the Group acquired several businesses that operated Arby’s restaurants. Each of these acquisitions was accounted for as a purchase, and their results of operations are included beginning at the date of acquisition.

Additionally, during the year ended May 29, 2005, the Group reacquired two restaurants sold to TLSE, LLC (“TLSE”) during 1999. The restaurants were reacquired for $2,250, including cash, the exchange of a note receivable, issuance of a note and the assumption of certain liabilities. At the date of the initial sale of the restaurants to TLSE, the Group took a note and guaranteed TLSE’s third-party debt. As a result, this transaction was not accounted for as a sale. As of the reacquisition date, the Group recorded a deferred credit of $1,750 related to the transaction. Such deferred credit was applied as a reduction of the acquisition cost allocated to the net assets acquired.

18

RTM Restaurant Group
May 29, 2005
Notes to Combined Financial Statements (continued)
(In Thousands, Except Share and Per Share Amounts)

5. Acquisitions (continued)

The following summarizes the allocation of the aggregate purchase price of the Group’s acquisitions:

Acquisitions

The Company’s acquisitions are accounted for as business combinations in accordance with Statement of Financial Accounting Standards No. 141, “Business Combination.” (“SFAS 141”). Accounting for these transactions as purchase business combinations requires the allocation of purchase price paid to the assets acquired and liabilities assumed based on their fair values as of the date of the acquisition. The amount paid in excess of the fair value of net assets acquired is accounted for as goodwill.

In accordance with SFAS 141, Emerging Issues Task Force (“EITF”) No. 01-3, “Accounting in a Business Combination for Deferred Revenue of an Acquiree”, and EITF 04-11 “Accounting in a Business Combination for Deferred Postcontract Customer Support,” the Company valued the Chapter 7 & 13 bankruptcy “in place” accounts remaining performance obligation over the remaining average life on a fair value basis, scheduled any associated future billings, and present valued the amounts back to the purchase date of August 30, 2005. The fair value of the remaining performance obligation was obtained by determining the direct and incremental cost required to complete performance plus a normal profit margin. The process resulted in accounts having a purchased servicing obligation or purchased servicing asset depending on the amount of future performance obligation verses future billings. The liability/asset is then accreted to revenue/amortized to expense in the same amount and future month as was estimated in the service obligation valuation. See Note 2 for a further discussion on the Company’s acquisitions.

5. Acquisitions

      During 2004 and 2005, the Group acquired several businesses that operated Arby's restaurants. Each of these acquisitions was accounted for as a purchase and their results of operations are included beginning at the date of acquisition.

      Additionally, during the 40 weeks ended March 6, 2005, the Group reacquired two restaurants sold to TLSE, LLC (“TLSE”) during 1999. The restaurants were reacquired for $2,250, including cash, the exchange of a note receivable, issuance of a note and the assumption of certain liabilities. At the date of the sale of the restaurants to TLSE, the Group took a note and guaranteed TLSE's third-party debt. As a result, this transaction was not accounted for as a sale. This is consistent with the rules established by the Securities and Exchange Commission. As of the reacquisition date, the Company had recorded a deferred credit related to the transaction of $1,750. Such deferred credit was applied as a reduction of the acquisition cost allocated to the net assets acquired.

      The following summarizes the allocation of the aggregate purchase price of the Group's acquisitions:

41

RTM RESTAURANT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)