For Sonesta Simply Suites, what accounting principles must be followed in the preparation of financial statements?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
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. Significant estimates in our consolidated financial statements include the allowance for credit losses, useful lives of long-lived assets, valuation of intangible assets and goodwill, and impairment of long-lived assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Sonesta Simply Suites's 2025 Franchise Disclosure Document, the consolidated financial statements 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 set of guidelines and practices when creating their financial reports. These principles ensure transparency and consistency in financial reporting, making it easier for investors, creditors, and other stakeholders to understand and compare the company's financial performance.
GAAP covers a broad range of accounting topics, from revenue recognition to asset valuation. For example, 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 affect the reported amounts in the financial statements, such as estimating the allowance for credit losses and the useful lives of long-lived assets. These estimates are crucial for providing a fair and accurate representation of the company's financial position.
The FDD also highlights the importance of independent audits conducted in accordance with auditing standards generally accepted in the United States of America (GAAS). These audits provide an additional layer of assurance that the financial statements are presented fairly and in accordance with GAAP. The auditor's responsibilities include assessing the risks of material misstatement, evaluating the appropriateness of accounting policies, and concluding whether there are conditions that raise substantial doubt about the company's ability to continue as a going concern. For a prospective Sonesta Simply Suites franchisee, understanding that the company follows GAAP and undergoes regular audits can provide confidence in the reliability of the financial information presented.