What accounting principles must the financial statements of Sonesta Simply Suites follow?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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3. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States of America, or GAAP, and include all accounts and controlled subsidiaries' accounts. All inter-company accounts have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and related notes. Actual results could differ from those estimates.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to the 2025 FDD, the consolidated financial statements for Sonesta Simply Suites are prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America. This means that Sonesta Simply Suites adheres to a standardized framework of accounting rules, standards, and procedures when creating its financial statements. These principles ensure transparency and consistency in financial reporting, making it easier for potential franchisees and other stakeholders to understand and compare the company's financial performance.
GAAP covers various aspects of financial reporting, including revenue recognition, expense matching, asset valuation, and liability measurement. For instance, the FDD mentions that revenue is generally recognized as services are provided, primarily from franchise contracts and hotel operations. The application of GAAP also requires management to make estimates and assumptions that could affect the reported amounts in the financial statements, such as allowances for credit losses and the useful lives of long-lived assets.
For a prospective Sonesta Simply Suites franchisee, this adherence to GAAP is important because it provides a level of assurance that the financial information presented is reliable and comparable to other companies following the same standards. It allows franchisees to make informed decisions based on a consistent and transparent view of the company's financial health. Furthermore, the FDD includes an independent auditor's report, which expresses an opinion on whether the financial statements present fairly the company's financial position and results of operations in accordance with GAAP, adding another layer of credibility to the financial information provided.