Wendy's International (WEN)

Materiality of Unrecorded Adjustments

The Company does not record all immaterial adjustments in its consolidated financial statements. The Company performs a materiality analysis based on all relevant quantitative and qualitative factors. Effective December 31, 2006 the Company quantifies materiality of unrecorded adjustments in accordance with Staff Accounting Bulletin 108, “Considering the Effects of Prior Year Misstatements when Quantifying Measurements in Current Year Financial Statements” (“SAB 108”) issued by the Securities and Exchange Commission (the “SEC”). The impact on the current year financial statements of recording all potential adjustments, including both the carryover and reversing effects of amounts not recorded in prior years, are considered. Unrecorded adjustments are quantified using a balance sheet and an income statement approach which considers both (1) the amount of the misstatement originating in the current year income statement (generally referred to as the “Rollover” approach) and (2) the cumulative amount of the misstatements at the end of the current year (generally referred to as the “Iron Curtain” approach). Prior to December 31, 2006, the Company used only the Rollover approach to quantify the materiality of unrecorded adjustments.

See Note 16 for further disclosure related to the Company’s adoption of SAB 108 and the related adjustment to beginning retained earnings.