What is subject to change during the measurement period for Caption By Hyatt's acquisition?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
Our consolidated balance sheet at December 31, 2024 reflects preliminary estimates of the fair value of the assets acquired, liabilities assumed, and noncontrolling interest in the entity based on available information as of the acquisition date. The fair values of intangible assets acquired were estimated using either discounted future cash flow models or the relief from royalty method, both of which include revenue projections based on the expected contract terms and long-term growth rates, which are primarily Level Three assumptions. The fair value of the noncontrolling interest related to the equity interests in the VIE held by our venture partner was estimated based on 50% of enterprise value of the entity. The remaining assets and liabilities were recorded at their carrying values, which approximate their fair values.
We will continue to evaluate the contracts acquired and the underlying inputs and assumptions used in our valuation of assets acquired, liabilities assumed, and the noncontrolling interest in the entity. Accordingly, these estimates, along with any related tax impacts, are subject to change during the measurement period, which is up to one year from the date of acquisition.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, during the measurement period, which extends up to one year from the acquisition date, several financial aspects are subject to change. These include the preliminary estimates of the fair value of assets acquired, liabilities assumed, and the noncontrolling interest in the entity.
The fair values of intangible assets, which are determined using discounted future cash flow models or the relief from royalty method, are also subject to change. These models rely on revenue projections based on expected contract terms and long-term growth rates, classified as Level Three assumptions, indicating a higher degree of estimation and judgment. The fair value of the noncontrolling interest, related to equity interests in a Venture Investment Entity (VIE) held by Caption By Hyatt's venture partner, is estimated based on 50% of the entity's enterprise value and is also subject to change. The remaining assets and liabilities are recorded at their carrying values, approximating their fair values.
Caption By Hyatt will continue to assess the acquired contracts, underlying inputs, and assumptions used in valuing the acquired assets, assumed liabilities, and noncontrolling interest. Any related tax impacts are also subject to change during this period. This ongoing evaluation and potential adjustments highlight the complexities and uncertainties involved in valuing acquired entities and the importance of understanding the potential for financial adjustments post-acquisition.