Where are transaction-related costs, net, classified in Budget's financial statements?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
nation at its fair value on the acquisition date. The fair value of the contingent consideration is generally estimated by utilizing a Monte Carlo simulation technique, based on a range of possible future results (Level 3). Any changes in contingent consideration are recorded in transaction-related costs, net.
Transaction-related costs, net are classified separately in the Consolidated Statements of Operations. These costs are comprised of expenses primarily related to acquisition-related activities such as duediligence and other advisory costs, expenses related to the integration of the 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, transaction-related costs, net, are classified separately in the Consolidated Statements of Operations. These costs primarily relate to acquisition-related activities, such as due diligence, advisory costs, and expenses related to integrating the acquired company's operations, including implementing best practices and process improvements. They also include non-cash gains and losses related to re-acquired rights and expenses related to pre-acquired rights.
For a prospective Budget franchisee, understanding how these costs are classified is crucial for interpreting Budget's financial performance. Transaction-related costs can fluctuate depending on Budget's acquisition activity, which can impact the company's overall profitability. Franchisees should pay attention to these costs to assess the stability and growth strategy of Budget.
The FDD also provides specific figures for transaction-related costs, net, over the past three years. In 2024, these costs were $3 million, in 2023 they were $5 million, and in 2022 they were $8 million. Monitoring these trends can give franchisees insight into Budget's strategic decisions and their potential impact on the company's financial health.
It's important to note that changes in contingent consideration are also recorded in transaction-related costs, net. Contingent consideration results from business combinations and is initially recorded at fair value on the acquisition date, with any subsequent changes reflected in transaction-related costs. This can add variability to these costs and should be considered when analyzing Budget's financial statements.