Wendy's International (WEN)

Recently Issued Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board, which we refer to as the FASB, issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments,” which we refer to as SFAS 155. SFAS 155 amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which we refer to as SFAS 133, and FASB Statement 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 155 resolves issues addressed in SFAS 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS 155 is effective commencing with our first quarter of 2007 although early adoption is permitted. Although we hold preferred shares of several CDOs, which represent beneficial interests in securitized financial assets that we classify as available-for-sale securities, we do not believe that any of these interests represent freestanding or embedded derivatives which would be required to be accounted for as derivatives under the provisions of SFAS 155. Accordingly, we currently do not believe that the adoption of SFAS 155 will have any effect on our consolidated financial position or results of operations.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” which we refer to as Interpretation 48. Interpretation 48 clarifies how uncertainties in income taxes should be reflected in financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” Interpretation 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of potential tax benefits associated with tax positions taken or expected to be taken in income tax returns. Interpretation 48 prescribes a two-step process of evaluating a tax position, whereby an entity first determines if it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is then measured for purposes of financial statement recognition as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Interpretation 48 has disclosure requirements which include a rollforward of tax benefits taken that do not qualify for financial statement recognition, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate, the total amounts and financial statement classifications of interest and penalties recognized in the balance sheet and statement of operations and a description of tax years that remain subject to examination by major tax jurisdictions. For positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date, an entity should disclose the nature of the uncertainty, the nature of the event that could occur in the next twelve months that would cause

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the change and an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made. All disclosures required by Interpretation 48 must be included in each quarter’s interim financial statements in the year of adoption. Interpretation 48 is effective commencing with our first fiscal quarter of 2007. The provisions of Interpretation 48 are complex and we have not yet finalized the effect that adopting Interpretation 48 will have on our consolidated financial position and results of operations. However, based on our preliminary analysis, management does not expect Interpretation 48 will have any material impact on our consolidated financial position or results of operations. As described above, we will be required to provide additional financial statement disclosures upon adoption of Interpretation 48.

In September 2006, the FASB issued FASB Staff Position No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities” which we refer to as FSP AIR-1. FSP AIR-1 prohibits the use of the previously acceptable accrue-in-advance method of accounting for scheduled major maintenance activities, which is the method we currently use for scheduled major maintenance overhauls of corporate aircraft. Under the accrue-in- advance method, the estimated cost of such an overhaul is amortized to the date of the next overhaul with any difference between estimated and actual cost charged or credited to income upon completion of the overhaul. FSP AIR-1 requires that we use either (1) a direct expensing method, under which the costs of overhauls are charged to operations as incurred, or (2) a deferral method, under which the actual cost of each overhaul is capitalized and amortized until the next overhaul. FSP AIR-1 is effective for our first fiscal quarter of 2007. We currently expect to adopt the direct expensing method. We will be required to restate our consolidated financial statements for all prior periods presented for the difference between the accrue-in-advance method and the method adopted for scheduled major airplane maintenance overhauls with the cumulative effect of the change in accounting method reflected as of the beginning of the earliest period presented. As of December 31, 2006 we have an accrual of $4,954,000 for such costs which, upon adoption of FSP AIR-1, will be recorded as an increase to retained earnings as of the beginning of the earliest year presented. For the year ended December 31, 2006 we have expensed $0.9 million of costs related to scheduled major maintenance overhauls under the accrue-in-advance method. We currently expect to incur approximately $1.5 million of costs for certain major overhauls on the aircraft in 2007 which will be recognized as a charge to results of operations in 2007 and thereafter periodic maintenance may prompt significant repairs which would affect our results of operations during the year those costs are incurred.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” which we refer to as SFAS 157. SFAS 157 addresses issues relating to the definition of fair value, the methods used to measure fair value and expanded disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The definition of fair value in SFAS 157 focuses on the price that would be received to sell an asset or paid to transfer a liability, not the price that would be paid to acquire an asset or received to assume a liability. The methods used to measure fair value should be based on the assumptions that market participants would use in pricing an asset or a liability. SFAS 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to adoption. Currently some of our investments are assigned fair values based on their bid price. SFAS 157 requires us to use the most representative fair value within the bid-asked spread if the fair value of an asset is based on bid and asked prices. To the extent that these investments are present in our portfolio at the time of adoption of SFAS 157, our consolidated financial position will be affected for any such investments classified as available-for-sale securities and both our consolidated financial position and results of operations will be affected for any such investments classified as trading securities. We will also be required to present the expanded fair value disclosures upon adoption of SFAS 157. SFAS 157 is, with some limited exceptions, to be applied prospectively and is effective commencing with our first fiscal quarter of 2008, although earlier application in our first fiscal quarter of 2007 is permitted. We currently do not plan to adopt SFAS 157 prior to our first fiscal quarter of 2008.

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Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board (“FASB”) issued the Revised Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46R”). The revised Interpretation requires that a variable interest entity (“VIE”) be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE’s activities or entitled to receive a majority of the VIE’s residual returns or both. The consolidation provisions of FIN 46R immediately apply to VIEs created after January 1, 2004 or interests in VIEs obtained after that date. The Group did not create or acquire any VIEs after January 1, 2004. For interests in VIEs obtained prior to January 1,

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

2. Summary of Significant Accounting Policies—(continued)

2004, the consolidation provisions of FIN 46R become effective for the Group in its fiscal year ending May 28, 2006.

Although the Group has not adopted FIN 46R, and its provisions have not been applied in the accompanying Combined Financial Statements, the Group has determined that, as of May 29, 2005, it has four VIEs that it would consolidate upon application of FIN 46R: Winners International Restaurants, Inc., Mrs. Winners, L.P. and Winners Partners (collectively “Winners”) and RTM Future Associates. These entities are under common control with the Group. Subsequent to the Triarc Transaction, the Group holds no variable interests in the entities.

Additionally, the Group has determined that it holds variable interests in the form of notes receivable from entities that purchased restaurants from the Group subsequent to January 1, 2004. As more fully described in Note 4, in April and September of 2004, the Group sold restaurants to unrelated third parties for cash and notes receivable. The buyers are variable interest entities; however, the Group is not considered the primary beneficiary and, therefore, has not consolidated the entities. The Group’s outstanding notes receivable balances exposed to loss as a result of its involvement in these variable interest entities totaled approximately $2,000 as of May 29, 2005.

The Group may hold variable interests in the form of notes receivable from entities that purchased restaurants from the Group prior to January 1, 2004. The Group has not yet determined whether any of such entities are VIEs or whether the Group will be required to consolidate any of them beginning in fiscal year 2006.

In December 2004, the FASB issued a revision to Statement of Financial Accounting Standards No. 123, Share Based Payment (“SFAS 123R”). The revision requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments granted to employees. SFAS 123R eliminates the alternative method of accounting for employee share-based payments previously available under APB 25. The Statement will become effective for the Group in its fiscal year ending May 27, 2007. The Group believes adoption of SFAS 123R will not have a significant effect on its Combined Financial Statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”). Once adopted, SFAS 150 will require that the Group’s redeemable common stock be classified as a liability and measured at fair value. The effective date of SFAS 150 for nonpublic companies has been deferred indefinitely. All of the Group’s redeemable common stock was acquired in the Triarc Transaction. For additional information about the Triarc Transaction, see Note 19.

In March 2005, the FASB issued Statement of FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”). This interpretation clarifies the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards No. 143 (“SFAS 143”) and requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the amount can be reasonably estimated. FIN 47 also clarifies the type of information that would be sufficient to reasonably estimate the fair value of a conditional asset retirement obligation. The Interpretation will become effective for the Group in its fiscal year ending May 28, 2006. The Group believes adoption of FIN 47 will not have a material effect on the Group’s Combined Financial Statements.

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

Recently Issued Accounting Pronouncements

       In December 2004, the Financial Accounting Standards Board, which we refer to as the FASB, issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” which we refer to as SFAS 123(R), which revises SFAS No. 123, “Accounting for Stock-Based Compensation, ” which we refer to as SFAS 123, and which supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” which we refer to as APB 25. The requirements of SFAS 123(R) are similar to those of SFAS 123, except that SFAS 123(R) generally requires companies to measure the cost of employee services received in exchange for a grant of equity instruments, including grants of employee stock options and restricted stock, based on the fair value of the award using an appropriate fair value option-pricing model. The intrinsic value method of measuring these awards under APB 25, which we currently use, and the resulting

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required pro forma disclosures under SFAS 123 will no longer be an alternative to the use of the fair value method under SFAS 123(R). In April 2005, the Securities and Exchange Commission adopted an amendment to Rule 4-01(a) of Regulation S-X that defers the required effective date of SFAS 123(R) for us to our first fiscal quarter of 2006. During 2005 and through February 2006 the FASB staff issued FASB Staff Position (“FSP”) FAS 123(R)-1, FSP FAS 123(R)-2, FSP FAS 123(R)-3 and FSP FAS 123(R)-4. FSP 123(R)-1 through FSP 123(R)-4 provide implementational guidance for SFAS 123(R) and will be applicable commencing the first quarter of 2006 upon initial adoption of SFAS 123(R). Upon adoption of SFAS 123(R), we currently expect to use the modified prospective application method, which will apply to new grants and to grants modified, repurchased, or cancelled on or after the effective date of SFAS 123(R). Under this method, the fair value of all grants vesting on or after the adoption date will be included in the determination of our results of operations. On December 21, 2005, we immediately vested 4,465,500 previously unvested stock options resulting in the exclusion of any effect of these options upon the adoption of SFAS 123(R) in 2006. The total estimated compensation cost relating to nonvested grants issued prior to January 2, 2006, as determined in accordance with the fair value method, is $15.5 million. In accordance with the modified prospective application method, this $15.5 million will be amortized to expense over the current vesting periods of the grants principally through our first fiscal quarter of 2008 assuming no changes are made to the currently scheduled vesting. The estimated amount of compensation cost based on currently outstanding stock awards related to the Company's year ending December 31, 2006 is $10.7 million. Any employee stock compensation grants on or after January 2, 2006 will be valued in accordance with SFAS 123(R) and will have a material impact on our consolidated results of operations and income (loss) per share.

       In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections,” which we refer to as SFAS 154. SFAS 154 replaces Accounting Principles Board Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 applies to all voluntary changes in accounting principles and to changes required by an accounting pronouncement in the unusual case when specific transition provisions are not provided by the accounting pronouncement. SFAS 154 requires retrospective application to prior periods' financial statements for a change in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Under SFAS 154, a change in the method of applying an accounting principle will also be considered a change in accounting principle. SFAS 154 is effective commencing with our first fiscal quarter of 2006. We presently do not believe that the adoption of SFAS 154 will have any immediate effect on our consolidated financial position or results of operations since we do not currently anticipate changing any accounting methods or principles except with regard to the adoption of SFAS 123(R) which provides specific transition provisions.

       In October 2005, the FASB issued FASB Staff Position FAS 13-1, “Accounting for Rental Costs during a Construction Period,” which we refer to as FSP 13-1. FSP 13-1 addresses rental costs associated with land or building operating leases that are incurred during a construction period and address whether a lessee may capitalize such rental costs. FAS 13-1 requires that such rental costs be recognized as rental expense and not capitalized. FSP 13-1 is effective commencing with our first fiscal quarter of 2006. Currently, we are recognizing any such costs as rental expense and, accordingly, believe that the adoption of FSP 13-1 will not have any effect on our consolidated financial position or results of operations.

       In November 2005, the FASB issued FASB Staff Position Nos. FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” which we refer to as FSP 115 and FSP 124. FSP 115 and FSP 124 address the determination as to when an investment becomes impaired, whether that impairment is other-than-temporary and the measurement of impairment loss and will be effective with our first fiscal quarter of 2006. Since the principles we use to measure any other-than-temporary impairment losses are generally consistent with those provided in FSP 115 and FSP 124, we do not believe FSP 115 and FSP 124 upon adoption will have any effect on our consolidated financial position or results of operations.

       In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments,” which we refer to as SFAS 155. SFAS 155 amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which we refer to as SFAS 133, and FASB Statement 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 155

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resolves issues addressed in SFAS 133 Implementation Issue No. D1 “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS 155 is effective commencing with our first quarter of 2007 although early adoption is permitted. Since we do not currently hold or plan to hold any financial instruments of the type to which SFAS 155 applies, we currently do not believe that the adoption of SFAS 155 will have any effect on our consolidated financial position or results of operations.

Recently Issued Accounting Pronouncements

      The Financial Accounting Standards Board (“FASB”) issued the Revised Interpretation No. 46,