How are Remax's settlement payables transacted in Canadian dollars converted to U.S. dollars for balance sheet purposes, as described in Item 1?

According to Remax's 2025 Franchise Disclosure Document, settlement payables transacted in Canadian dollars are translated into U.S. dollars at the balance sheet date for financial reporting purposes. This means that the Canadian dollar amount of the settlement payable is converted to its U.S. dollar equivalent using the exchange rate in effect on the date the balance sheet is prepared.

For example, Remax's RE/MAX OA reached an agreement to pay a total settlement amount of $7.8 million Canadian dollars related to Canadian antitrust litigations. As of December 31, 2024, this Canadian Settlement Amount payable was approximately $5.4 million in U.S. dollars. This translation is done to consolidate the financial statements and provide a clear picture of Remax's financial position in its functional currency, which is the U.S. dollar, except for its Canadian subsidiaries for which it is the Canadian Dollar.

This accounting practice is important for prospective franchisees to understand because it affects how Remax reports its liabilities and overall financial health. Fluctuations in exchange rates between the Canadian and U.S. dollar can impact the reported value of these settlement payables on Remax's balance sheet. Franchisees should be aware of these potential fluctuations and their effect on the company's financial statements, as they could influence Remax's ability to meet its financial obligations and support its franchisees.