How are property and equipment stated on Sonesta Simply Suites' financial statements?

According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, property and equipment are recorded at cost, minus accumulated depreciation. The cost of improvements that extend the life of the property and equipment are capitalized, meaning they are added to the asset's book value and depreciated over their useful life. Routine repairs and maintenance costs are expensed as they are incurred, meaning they are deducted from revenue in the period they occur.

This accounting treatment is standard practice. Capitalizing improvements can increase the reported value of assets on the balance sheet, while expensing repairs ensures that only value-adding activities are reflected as assets. Depreciation systematically reduces the asset's value over its useful life, reflecting wear and tear.

The FDD also provides a breakdown of property and equipment, net, for the years 2024 and 2023. In 2024, the net value was $1,178, compared to $816 in 2023. A detailed table shows the breakdown of assets such as building improvements, furniture and fixtures, and landscaping, along with their estimated useful lives. For example, building improvements have useful lives of up to 40 years, while furniture and fixtures are depreciated over up to 10 years. Accumulated depreciation was ($501) in 2024 and ($800) in 2023.

Prospective franchisees should understand these accounting policies, as they affect the financial statements presented in the FDD. Understanding how assets are valued and depreciated can help in assessing the financial health and performance of Sonesta Simply Suites.