How are ROU assets and lease liabilities recognized by Bw Premier Collection?
Bw_Premier_Collection Franchise · 2025 FDDAnswer from 2025 FDD Document
f the Company's lease classification determination.
Under Accounting Standards Codification ("ASC") Leases ("ASC 842"), the Company recognizes a right-of-use ("ROU") asset and lease liability to account for its operating leases. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. ROU assets are based on the lease liability (which represents the present value of remaining lease payments) and are increased by prepaid lease payments and decreased by lease incentives received. Lease incentives are amortized through the lease asset as reductions of expense over the lease term. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company's ROU assets and lease liabilities.
Leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Certain leases require the Company to pay taxes, insurance, maintenance and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the ROU assets and lease liabilities to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As a practical expedient, lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. The Company elected the short-term lease recognition exemption for all leases. Therefore, leases with an initial term of 12 months or less are not recorded in the Consolidated Statements of Financial Position; instead, lease payments are recognized as lease expense on a straight-line basis over
November 30, 2024
the lease term. The depreciable life of the ROU assets are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option.
The Company elected to use a risk-free rate as the discount rate for all asset classes.
Source: Item 23 — Receipts (FDD pages 54–203)
What This Means (2025 FDD)
According to Bw Premier Collection's 2025 Franchise Disclosure Document, the company recognizes right-of-use (ROU) assets and lease liabilities for its operating leases. This practice aligns with Accounting Standards Codification (ASC) 842, which Bw Premier Collection adopted on December 1, 2022. The ROU assets represent Bw Premier Collection's right to use an underlying asset for the lease term, while the lease liabilities represent the company's obligation to make lease payments arising from the lease. These assets and liabilities are recognized on the date the lease commences, based on the present value of lease payments over the lease term.
Specifically, Bw Premier Collection calculates ROU assets based on the lease liability, increased by any prepaid lease payments and decreased by any lease incentives received. Lease incentives are then amortized through the lease asset as reductions of expense over the lease term. If Bw Premier Collection is reasonably certain to exercise a renewal option, the option periods are included when determining the ROU assets and lease liabilities. This approach ensures that the financial statements reflect the economic reality of Bw Premier Collection's lease obligations and rights.
Furthermore, Bw Premier Collection accounts for leases with rent escalations by recognizing expense on a straight-line basis over the lease term. Certain leases may require Bw Premier Collection to pay for taxes, insurance, maintenance, and other operating expenses related to the leased asset. However, these variable costs are not included in the measurement of ROU assets and lease liabilities; instead, they are recognized as a variable lease expense when incurred. Additionally, Bw Premier Collection has elected a short-term lease recognition exemption for leases with an initial term of 12 months or less, meaning these leases are not recorded on the consolidated balance sheet, and lease payments are recognized as lease expense on a straight-line basis over the lease term. This accounting treatment provides transparency regarding Bw Premier Collection's lease obligations and asset utilization.