How does Budget account for investments for which it has the ability to exercise significant influence, but does not have a controlling interest?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
acquiree's operations with our own operations, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquired to non-cash gains and losses related to re-acquired rights, expenses related to pre-acquired rights.
We account for investments for which we have the ability to exercise significant influence, but do not have a controlling interest, using the equity method of accounting and record our proportional share of net income or loss within operating expenses in the Consolidated Statements of Operations. We assess equity method investments for impairment whenever events or changes in circumstances indicate that the income or loss within operating expenses in the Consolidated Statements of Operations. We assess equity method investments for impairment whenever events or changes in circumstances indicate that the income of such investments may not be recoverable. Any difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment charge if carrying amounts of such investments may not be recoverable. Any uniferrice between the barrying value of the equity method investment and its estimated fair value of a complete and as a minimum charge in the loss in value is deemed other than temporary. As of December 31, 2024 and 2023, we had investments with a carrying value of $100 million and $93 million, respectively, recorded within other non-current the loss in value is deemed other than temporary. As of December 31, 2024 and 2023, we had investments with a carrying value of $100 million and $93 million, respectively, recorded within other non-current assets on the Consolidated Balance Sheets.
Aggregate realized gains and losses on equity method investments and dividend income are recorded within operating expenses on the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company uses the equity method of accounting for investments where it can exert significant influence but lacks a controlling interest. This means Budget records its proportional share of the net income or loss from these investments within its operating expenses in the Consolidated Statements of Operations.
Budget assesses these equity method investments for impairment whenever events or changes suggest that the income from such investments may not be recoverable. If the carrying value of the investment differs from its estimated fair value, an impairment charge is recognized if the carrying amounts are deemed unrecoverable, especially if the loss in value is considered other than temporary.
As of December 31, 2024, Budget had investments with a carrying value of $100 million, and as of December 31, 2023, the value was $93 million. These amounts are recorded within other non-current assets on the Consolidated Balance Sheets. Furthermore, aggregate realized gains and losses on equity method investments and dividend income are recorded within operating expenses on the Consolidated Statements of Operations. In 2024, Budget recorded net gains from these investments, including dividend income of $23 million, while in 2023 and 2022, the dividend income was $12 million each year.
For a prospective franchisee, this accounting practice is important because it reflects how Budget manages and reports its investments in other entities. The equity method ensures that Budget's financial statements accurately represent its financial stake and performance in these investments, which can impact the overall financial health and stability of the company. Understanding these accounting policies can provide franchisees with insights into Budget's financial strategies and risk management practices.