What accounting policy election has Remax made regarding ROU assets and lease liabilities for short-term leases?

According to the 2025 Remax Franchise Disclosure Document, Remax has elected not to recognize Right-of-Use (ROU) assets and lease liabilities for short-term leases. This accounting policy applies to leases with a term of 12 months or less at the commencement date.

Specifically, this election applies if Remax is not reasonably certain to exercise available renewal options that would extend the lease term beyond 12 months. In such cases, lease payments are recognized on a straight-line basis over the lease term. This means that the lease expense is evenly distributed over the duration of the lease, rather than being recognized in a way that reflects the actual payment schedule or the potential value of the leased asset.

For a Remax franchisee, this policy means that if you enter into a short-term lease (12 months or less) for your office space or equipment, Remax will not record an ROU asset or a lease liability on its balance sheet. Instead, the lease payments will be expensed evenly over the lease term. This can simplify the accounting for short-term leases and may reduce the administrative burden associated with tracking and reporting these leases.

This accounting treatment is an election, meaning Remax could have chosen to recognize ROU assets and lease liabilities for all leases, including short-term ones. By choosing not to, Remax is taking advantage of an accounting simplification that is available under U.S. GAAP. This election does not change the actual cash payments made for the lease, but it does affect how those payments are reported in Remax's financial statements.