Are there any disclaimers or qualifications related to the Best Western financial statements?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
| (in thousands) | 2024 | 2023 | |
|---|---|---|---|
| Accrued compensation and benefits | $ 29,935 | $ 27,155 | |
| Accounts payable | 25,340 | 26,273 | |
| Accrued liabilities | 21,878 | 21,851 | |
| Travel Card liability | 3,716 | 4,542 | |
| Current construction loans payable | 1,079 | 1,039 | |
| Current lease liability | 690 | 848 | |
| Total | $ 82,638 | $ 81,708 |
(p) Significant Estimates and Assumptions
Management of the Company has made certain estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates.
(g) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, principally from Members, net, and investments.
November 30, 2024
The Company has concentrated its credit risk for cash by maintaining deposits in financial institutions which exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash and cash equivalents.
Accounts receivable, principally from Members, net, are primarily from Member, franchisee, licensee fees and services, and product sales. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of hoteliers located throughout the world comprising the Company's customer base. The Company does not require collateral within credit limits established. In those instances when a Member, franchisee, or licensee requests product in excess of the credit limit allowed by Company policy, the Company requests a letter of credit, deposit, or prepayment to secure the collection of accounts receivable. The Company performs ongoing evaluations of its hotelier receivables; non-payment can lead to cancellation of the applicable membership, license or franchise.
The Company is also potentially subject to concentrations of credit risk in its investments. The Company has investments in certificates of deposits, mutual funds, common shares, U.S. treasury and government agency bonds, corporate bonds, mortgage and asset-backed securities, and municipal and provincial notes and bonds. The Company has appointed an investment advisory firm to oversee the Company's investment strategy who have assigned various fund managers to manage the Company's investments.
Source: Item 21 — Financial Statements (FDD page 107)
What This Means (2025 FDD)
According to Best Western's 2025 Franchise Disclosure Document, the financial statements prepared by the company's management involve certain estimates and assumptions. These estimates and assumptions relate to the reporting of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities, all of which are necessary to conform with Generally Accepted Accounting Principles (GAAP). Because these are estimates, the actual results for Best Western could differ. This is a standard disclaimer that acknowledges the inherent uncertainty in financial reporting.
Additionally, Best Western's financial instruments are subject to concentrations of credit risk, primarily related to cash and cash equivalents, accounts receivable from members, and investments. The company mitigates credit risk for cash by maintaining deposits in financial institutions that exceed the coverage provided by the U.S. Federal Deposit Insurance Corporation. Best Western has not experienced any losses in these accounts and believes the risk is low. Accounts receivable are mainly from member fees, franchisee fees, licensee fees and services, and product sales. The credit risk is limited due to the large number of hoteliers comprising Best Western's customer base. The company may request letters of credit, deposits, or prepayments when a member requests product in excess of their credit limit.
Best Western is also exposed to credit risk in its investments, which include certificates of deposit, mutual funds, common shares, U.S. Treasury and government agency bonds, corporate bonds, mortgage and asset-backed securities, and municipal and provincial notes and bonds. To manage this risk, Best Western has appointed an investment advisory firm to oversee its investment strategy and assign fund managers. The company believes it is not exposed to significant credit risk due to its ability to hold investments until recovery and the active management of its portfolio. Finally, the FDD states that Best Western expenses advertising costs as they are incurred and records them as advertising and promotion expenses.