What is the purpose of including financial statements in the Even Hotels FDD?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
fees to Six Continents Hotels, Inc. All Company operating and administrative expenses are provided for by Six Continents Hotels, Inc. under the terms of the Agreement. Since 1 January 2022, the credit risk relating to royalty and royalty-related fees is borne by Six Continents Hotels, Inc.
Notes to Financial Statements (continued)
1. Description of the Business and Basis of Presentation (continued)
Basis of Presentation
The Company does not own or consolidate any other entity and is a wholly owned subsidiary of Six Continents Hotels, Inc. The Company's ultimate parent and controlling party is InterContinental Hotels Group PLC ("IHG" or the "Parent"). The financial statements are not necessarily indicative of the financial position, results of operations, and cash flows that might have occurred had the Company been a stand-alone entity not integrated into IHG's other operations.
The Company's financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. All assets, liabilities, revenues and expenses in the accompanying financial statements have been derived from the separate records maintained by the Company with the exception of the allocation of certain expenses incurred by affiliated companies and the allocation of certain expenses from the Parent. Such allocations are not intended to represent the costs that would be or would have been incurred if the Company were a standalone operation.
2. Summary of Significant Accounting Policies
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 s
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 98)
What This Means (2025 FDD)
According to the 2025 Even Hotels Franchise Disclosure Document, the company's financial statements are prepared following generally accepted accounting principles in the United States of America. These statements include assets, liabilities, revenues, and expenses derived from the company's records. However, certain expenses incurred by affiliated companies and the parent company are allocated, and these allocations might not reflect the costs of a standalone operation.
The financial statements require management to make estimates and assumptions that could affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates. The financial statements also cover various aspects of Even Hotels's accounting policies, such as cash and cash equivalents, allowance for credit losses, and contract assets. For instance, amounts paid to hotel owners to secure franchise agreements are treated as consideration payable to a customer and recorded as a contract asset.
These financial statements also provide insights into Even Hotels's revenue recognition practices, including revenue from hotel operations, franchise royalty fees, and system fund revenues. For example, franchise royalty fees are typically charged as a percentage of hotel gross rooms revenues and are treated as variable consideration. The Even Hotels FDD also requires franchisees to prepare and maintain accurate financial records concerning gross rooms revenue and all financial, operating, and marketing aspects of the hotel, utilizing accounting and reporting standards as reasonably required by IHG. IHG also has the right to audit these records and can assess an audit fee of $3,000 if any deficiency in payments is discovered.