What was the allowance for credit losses for Even Hotels at December 31, 2021?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported year. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, interest-bearing securities with original maturities of less than three months.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Allowance for Credit Losses
Accounts receivable arise from sales to a large number of customers. Accounts recei
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, the allowance for credit losses at December 31, 2021, was $11,930,910. This allowance was released for expected credit losses on January 1, 2022. As of December 31, 2022, 2023, and 2024, the allowance for credit losses was $0.
This indicates that Even Hotels, or rather its parent company Six Continents Hotels, Inc., had set aside approximately $11.9 million to cover potential uncollectible accounts receivable as of the end of 2021. However, due to an agreement effective January 1, 2022, the responsibility for covering these credit losses shifted to Even Hotels' parent company. Consequently, the $11,930,910 was released back into the income statement during 2022, and Even Hotels no longer maintained an allowance for credit losses on its books for the subsequent years.
For a prospective franchisee, this accounting change means that Even Hotels' financial statements from 2022 onwards will not reflect any allowance for credit losses. This is because the parent company now bears the risk of uncollectible accounts. While this might seem like a minor detail, it reflects a significant shift in financial responsibility within the Even Hotels corporate structure. Franchisees should be aware of these types of inter-company agreements and how they might impact the financial reporting and risk allocation within the franchise system.
It is important for potential franchisees to understand the implications of such changes and how they might affect the overall financial health and stability of Even Hotels. While the parent company assuming responsibility for credit losses could be seen as a positive, franchisees should still conduct thorough due diligence to assess the financial strength of both Even Hotels and its parent company.