What is the carrying value of brand names with indefinite lives for Sonesta Select Sonesta Essential?
Sonesta_Select_Sonesta_Essential Franchise · 2025 FDDAnswer from 2025 FDD Document
tion impact of sold assets was $0.4 million.
5. Intangible Assets, net
At December 31, 2024 and 2023, our intangible assets were as follows (in thousands):
| Asset Description | Cost | umulated | Net | |
|---|---|---|---|---|
| ortization | ||||
| Amortizable intangible assets: | ||||
| Agreements with franchisees | $ 5,184 | $ | (902) | $ 4,282 |
| Carrying value of brand names (finite lives) | 200 | (128) | 72 | |
| Total amortizable intangible assets | 5,384 | (1,030) | 4,354 | |
| Carrying value of brand names (indefinite lives) | 16,530 | 16,530 | ||
| Intangible assets, net | $ 21,914 | $ | (1,030) | $ 20,884 |
| Asset Description | Cost | ımulated | Net | |
| -------------------------------------------------- | ----------- | ------- | ----------------------- | -------------- |
| rtization | ||||
| Amortizable intangible assets: | ||||
| Agreements with franchisees | $ 5,184 | $ | (666) | $ 4,518 |
| Carrying value of brand names (finite lives) | 200 | (94) | 106 | |
| Total amortizable intangible assets |
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 carrying value of brand names with indefinite lives is detailed in the financial statements. For the year ending December 31, 2024, the carrying value of brand names with indefinite lives is listed as $16,530. For the year ending December 31, 2023, the carrying value is listed as $16,529. These intangible assets are not amortized, meaning their value is not gradually reduced over time, because their useful lives are considered indefinite.
Sonesta Select Sonesta Essential assesses these indefinite-lived intangible assets annually to determine if their classification as indefinite is still appropriate and tests them for impairment. Impairment testing may also occur if circumstances suggest that the fair value of the asset is less than its carrying amount. This process involves both qualitative and quantitative assessments to ensure the asset's value is accurately reflected. If the estimated fair value exceeds the carrying value, no impairment is recognized. However, if the carrying amount exceeds the fair value, an impairment loss is recognized for the difference.
For a prospective franchisee, understanding the carrying value of brand names with indefinite lives is crucial because it reflects the financial stability and brand strength of Sonesta Select Sonesta Essential. The fact that these assets are not amortized suggests that Sonesta Select Sonesta Essential believes the brand names will maintain their value indefinitely. Regular impairment testing further ensures that the reported value is realistic and not overstated. This provides a level of assurance that the brand's value is actively managed and protected, which can influence the franchisee's potential return on investment.