How are Embassy Suites By Hilton's contract liabilities presented in the balance sheet?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
eclassified to deferred revenues. In certain cases, if the franchise application is not approved, the fee is recorded as an other current liability in our balance sheet until it is refunded to the applicant, less processing fees, if applicable.
Contract Liabilities
Contract liabilities relate to non-refundable advance consideration received from hotel owners for application, initiation and other fees reclassified from franchise deposits. This consideration received from hotel owners is recognized over the term of the related contract. Our contract liabilities are presented as deferred revenues in our balance sheet.
Fair Value Measurements - Valuation Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (i.e., an exit price). We use the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 97)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, contract liabilities, which are non-refundable advance payments from hotel owners for application, initiation, and other fees, are classified as deferred revenues on the balance sheet. These advance payments are initially recorded as franchise deposits and then reclassified to deferred revenues once they become non-refundable. The revenue recognition occurs over the term of the related contract.
Specifically, the current portion of deferred revenues, representing the amount expected to be recognized within one year, was $41,598 in 2024 and $37,811 in 2023. The remaining deferred revenues, representing the long-term portion, amounted to $517,282 in 2024 and $486,418 in 2023. This distinction between current and long-term liabilities provides a clearer picture of Embassy Suites By Hilton's financial obligations and revenue recognition schedule.
For a prospective Embassy Suites By Hilton franchisee, understanding how these contract liabilities are presented is crucial. It reflects the financial health and stability of the franchise system. The deferred revenue balance indicates the amount of future revenue already secured through advance payments, which can be a positive indicator of the brand's appeal and financial stability. Monitoring these figures over time can provide insights into the company's growth and revenue recognition patterns.