Comfort Inn 2011 Annual Report Download - page 74
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Table of Contents
Other current assets consist of the following at:
Land held for sale
$11,089
Prepaid expenses
8,070
Notes receivable (See Note 3)
3,966
Other current assets
1,131
Total
$24,256
Land held for sale represents the Company’s purchase of various parcels of real estate as part of its program to incent franchise development in strategic
markets for certain brands. The Company has acquired this real estate with the intent to resell it to third-party developers for the construction of hotels
operated under the Company’s brands. During the first quarter of 2011, the Company determined that one parcel of land no longer met the criteria to be
classified as a current asset held for sale. As a result, the Company reclassified this land to other long-term assets on the Company’s consolidated balance
sheets at the lower of its carrying amount or fair value. The Company determined that the carrying amount of the land exceeded its estimated fair value by
approximately $1.8 million based on comparable sales. As a result, in the first quarter of 2011, the Company reduced the carrying amount of the land to its
estimated fair value and recognized a $1.8 million loss in other gains and losses in the consolidated statements of income.
Land held for sale(1) $1.3
$ —
$1.3
$ —
$(1.8)
___________________
(1) Included in Other Assets
The Company segregates its notes receivable for the purposes of evaluating allowances for credit losses between two categories: Mezzanine and Other
Notes Receivable and Forgivable Notes Receivable. The Company utilizes the level of security it has in the various notes receivable as its primary credit
quality indicator (i.e. senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans within these categories.
Mezzanine, and Other Notes Receivables
The Company has provided financing to franchisees in support of the development of properties in key markets. These notes include non-interest
bearing receivables as well as notes bearing market interest rates. Non-interest bearing notes are recorded at their unamortized discounts. At December 31, 2011
and 2010, all discounts were fully amortized. Interest income associated with these notes receivable is reflected in the accompanying consolidated statements of
income under the caption interest income.
The Company expects the owners to repay the loans in accordance with the loan agreements, or earlier as the hotels mature and capital markets permit.
The Company estimates the collectability and records an allowance for loss on its mezzanine and other notes receivable when recording the receivables in the
Company’s financial statements. These estimates are updated quarterly based on available information.
The Company considers a loan to be impaired when, based on current information and events, it is probable that a creditor will be unable to collect all
amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual
interest payments and the contractual principal payments of a
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