How does Surestay Hotel By Best Western determine if a contract contains a lease?
Surestay_Hotel_By_Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company determines if a contract is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term begins on the commencement date, which is the date the Company takes possession of the asset and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Certain of the Company's leases contain renewal options for varying periods, which can be exercised at the Company's sole discretion. Leases are classified as operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. Where leases include options to purchase the leased asset at the end of the lease term, this is assessed as a part of the Company's lease classification determination.
Source: Item 23 — Receipts (FDD pages 88–286)
What This Means (2025 FDD)
According to Surestay Hotel By Best Western's 2025 Franchise Disclosure Document, the company determines if a contract is a lease at its inception. A contract is considered a lease if it conveys the right to control the use of an identified asset for a specific period in exchange for consideration. This determination is crucial for Surestay Hotel By Best Western to properly account for its lease obligations.
The lease term begins when Surestay Hotel By Best Western takes possession of the asset. The term may include options to extend or terminate the lease, which are considered if it is reasonably certain that the option will be exercised. Certain leases contain renewal options for varying periods, which can be exercised at the company's discretion.
Leases are classified as either operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value, and estimated residual value of the asset. If the lease includes an option to purchase the asset at the end of the term, this is also considered in the lease classification. This thorough evaluation ensures that Surestay Hotel By Best Western adheres to accounting standards and accurately reflects its financial obligations related to leased assets.