Where on The Standardx's condensed consolidated balance sheet was $20 million of the deferred consideration liability recorded?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
We closed on the transaction on December 27, 2024, paid cash of €359 million (approximately $374 million), and accounted for the transaction as a business combination as we are the primary beneficiary of the VIE (see Note 4). Upon acquisition, we recorded a $58 million deferred consideration liability at fair value, of which $20 million was recorded in accrued expenses and other current liabilities and $38 million was recorded in other long-term liabilities on our condensed consolidated balance sheet. The fair value was estimated using a discounted future cash flow model and includes assumptions and judgments regarding the discount rate, which is primarily a Level Three assumption. We also recorded a $33 million contingent consideration liability at fair value in other long-term liabilities on our condensed consolidated balance sheet. The fair value was estimated using a discounted future cash flow model and includes assumptions and judgments regarding the discount rate, estimated probability of achieving the hotel development milestones, and expected amount and timing of payments, which are primarily Level Three assumptions. Total purchase consideration was determined as follows:
Source: Item 1 — Financial Statements. (FDD pages 156–187)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, $20 million of the $58 million deferred consideration liability was recorded in accrued expenses and other current liabilities on the condensed consolidated balance sheet. The remaining $38 million was recorded in other long-term liabilities. This deferred consideration liability was established upon the acquisition of a business accounted for as a business combination, where The Standardx was the primary beneficiary of a Variable Interest Entity (VIE). The total cash payment at the close of the transaction on December 27, 2024, was approximately $374 million (€359 million).
The fair value of the deferred consideration liability was estimated using a discounted future cash flow model. This model relies on assumptions and judgments, particularly concerning the discount rate, which is classified as a Level Three assumption. Additionally, The Standardx recorded a $33 million contingent consideration liability at fair value in other long-term liabilities, also estimated using a discounted future cash flow model with Level Three assumptions related to the discount rate, the probability of achieving hotel development milestones, and the expected amount and timing of payments.
For a prospective franchisee, understanding how The Standardx accounts for acquisitions and liabilities can provide insight into the company's financial strategies and risk management. The use of Level Three assumptions in fair value estimations indicates a degree of subjectivity and reliance on internal data, which could be influenced by various factors. It is important for potential franchisees to assess the stability and predictability of The Standardx's financial performance, especially in relation to these types of liabilities, as they could impact the overall financial health of the company.