Why were the 2023 financial statements for Sonesta Select Sonesta Essential restated?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
sequently, consideration totaling $87.9 million was transferred from Sonesta to RLHC shareholders.
2. Restatement of Previously Issued Financial Statements
The financial statements for the year ended December 31, 2023 have been restated to correct errors within the statement of cash flows. In connection with the preparation of our 2024 financial statements, we detected that key money disbursements of $9,598 were not correctly presented in the 2023 statement of cash flows. In the previously issued financial statements, such disbursements were erroneously presented as investing cash outflows, and the 2023 statement of cash flows has been restated to correctly present these disbursements as operating cash outflows, within changes in other long-term assets.
In addition, during the preparation of the 2024 financial statements, we detected that cash transfers for centralized cash management of $38,264 were not correctly presented in the 2023 statement of cash flows. This resulted in an overstatement of cash provided by financing activities of $38,264 and an understatement of cash provided by investing activities of $38,264. The 2023 statement of cash flows has been restated to correctly present these cash transfers as investing cash inflows.
These misstatements did not have any impact on the Company's net income, balance sheet, or stat
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 84)
What This Means (2025 FDD)
According to Sonesta Select Sonesta Essential's 2025 Franchise Disclosure Document, the financial statements for the year ended December 31, 2023, were restated to correct errors within the statement of cash flows. Specifically, key money disbursements of $9,598 were not correctly presented in the 2023 statement of cash flows. These disbursements were initially and incorrectly recorded as investing cash outflows.
The restatement corrected the presentation of these disbursements, classifying them as operating cash outflows within changes in other long-term assets. Additionally, cash transfers for centralized cash management of $38,264 were incorrectly presented in the 2023 statement of cash flows. This resulted in an overstatement of cash provided by financing activities of $38,264 and an understatement of cash provided by investing activities of $38,264. The restatement corrected these cash transfers to be presented as investing cash inflows.
It is important to note that these corrections did not impact Sonesta Select Sonesta Essential's net income, balance sheet, or statement of shareholders' equity. The restatement only affected the presentation of cash flows within the financial statements. While the auditor's opinion was not modified, prospective franchisees should understand the nature of these corrections and ensure they have a clear understanding of the company's cash flow management practices.