How does Remax recognize lease cost expense for operating leases in its Consolidated Statements of Income (Loss)?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
Lease cost expense for lease payments related to operating leases (which is substantially all of the Company's leases) is recognized on a straight-line basis over the lease term and is recorded to "Selling, operating and administrative expenses' in the Consolidated Statements of Income (Loss).
The Company has made an accounting policy election not to recognize ROU assets and lease liabilities that arise from any of its short-term leases. All leases with a term of 12 months or less at commencement, for which the Company is not reasonably certain to exercise available renewal options that would extend the lease term past 12 months, are recognized on a straight-line basis over the lease term.
Source: Item 1 — Business and Organization (FDD pages 334–464)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, the company recognizes lease cost expenses for operating leases on a straight-line basis over the lease term. These expenses are then recorded under "Selling, operating and administrative expenses" in the Consolidated Statements of Income (Loss). This accounting treatment applies to substantially all of Remax's leases.
For leases with a term of 12 months or less at commencement, Remax has elected not to recognize right of use (ROU) assets and lease liabilities. These short-term leases, for which Remax is not reasonably certain to exercise available renewal options that would extend the lease term past 12 months, are also recognized on a straight-line basis over the lease term.
This accounting practice provides a consistent and predictable way of allocating lease expenses over the duration of the lease, which can help in analyzing Remax's financial performance. However, it's important to note that this applies primarily to Remax's corporate office spaces, as the document specifies that Remax does not recognize leases for any offices used by its franchisees, since all franchisees are independently owned and operated.