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This excerpt taken from the WEN 10-K filed Mar 1, 2007. Adjustment to Beginning Retained Earnings As disclosed in Note 1, the SEC issued SAB 108 which the Company adopted as of December 31, 2006. Prior to adopting SAB 108, the Company used only the Rollover approach to quantify unrecorded adjustments and considered all unrecorded adjustments to be immaterial in accordance with the Rollover approach. However, when quantifying unrecorded adjustments under the Iron Curtain approach, the Company has concluded that one of the unrecorded adjustments resulting from income deferred in years prior to 2004 is material. Additionally, when applying this Iron Curtain approach the Company identified two accruals provided in years prior to 2004 that are also no longer required although not material. The Company has recorded the cumulative effect of these unrecorded adjustments, one of which is now considered to be material, as an adjustment to retained earnings as of the beginning of 2006, as permitted under the transition provisions of SAB 108. The nature of the adjustments and the impact of each on the Company’s consolidated balance sheet as of January 2, 2006 are presented below (in thousands): 126
Triarc Companies, Inc. and Subsidiaries
Other
Accrued Expenses
Income Tax
Retained Deferred gain from sale of businesses (a)
$
(4,971
)
$
(809
)
$
2,087
$
3,693 Hurricane insurance proceeds (b)
—
(1,374
)
495
879 Self-insurance reserves (c)
—
(965
)
347
618
$
(4,971
)
$
(3,148
)
$
2,929
$
5,190
(a)
During the mid-1990’s the Company sold the assets and liabilities of certain non-strategic businesses, four of which did not qualify for accounting as discontinued operations. At the time of the sale of each of these
four businesses, the gain was deferred either because of (1) uncertainties associated with realization of non-cash proceeds, (2) contingent liabilities resulting from selling assets and liabilities of the entity or associated
with litigation or (3) possible losses or asset write-downs that might result related to additional businesses anticipated to be sold. If the criteria in SAB 108 were applied, these deferred gains would have been
recognized in results of operations prior to 2002. (b) The Company received insurance proceeds in 1993 in connection with hurricane damage to its then corporate office building. The gain otherwise associated with the insurance proceeds was not initially recognized due
to contingencies with respect to on-going litigation with the landlord of the office building. If the criteria in SAB 108 were applied, these proceeds should have been recorded as a gain prior to 2002 once the
litigation was settled. (c) Prior
to 2000 the Company self-insured certain of its medical programs. Reserves
set up were ultimately determined to be in excess of amounts required
based on claims experience. If the criteria in SAB 108 were applied, these
liabilities should have been reversed prior to 2002 once the liabilities
were determined to be in excess of the reserves required. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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