Comfort Inn 2013 Annual Report Download - page 78

Table of Contents
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less at the date of purchase to be cash equivalents.
At both December 31, 2013 and 2012, the Company had book overdrafts totaling $5.0 million which are included in accounts payable in the accompanying
consolidated balance sheets. These book overdrafts represent outstanding checks in excess of funds on deposit.
The Company maintains cash balances in domestic banks, which, at times, may exceed the limits of amounts insured by the Federal Deposit Insurance
Corporation. In addition, the Company also maintains cash balances in international banks which do not provide deposit insurance.
Capitalization Policies
Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the shorter of the lease term or their useful lives. Major renovations and replacements incurred during construction are
capitalized. Additionally, the Company capitalizes any interest incurred during construction; however, for the years ended December 31, 2013 and 2012, no
interest was capitalized. Upon sale or retirement of property, the cost and related accumulated depreciation are eliminated from the accounts and any related
gain or loss is recognized in the accompanying consolidated statements of income. Maintenance, repairs and minor replacements are charged to expense as
incurred.
Costs for computer software developed for internal use are capitalized during the application development stage and depreciated using the straight-line
method over the estimated useful lives of the software.
Leased property meeting certain capital lease criteria is capitalized and the present value of the related lease payments is recorded as a liability. The
present value of the minimum lease payments are calculated utilizing the lower of the Company’s incremental borrowing rate or the lessor’s interest rate implicit
in the lease, if known by the Company. Amortization of capitalized leased assets is computed utilizing the straight-line method over either the shorter of the
estimated useful life of the asset or the initial lease term and included in depreciation and amortization in the Company's consolidated statements of income.
However, if the lease meets the bargain purchase or transfer of ownership criteria the asset shall be amortized in accordance with the Company’s normal
depreciation policy for owned assets.
Assets Held for Sale
The Company considers property to be assets held for sale when all of the following criteria are met:
•Management commits to a plan to sell an asset;
•It is unlikely that the disposal plan will be significantly modified or discontinued;
•The asset is available for immediate sale in its present condition;
•Actions required to complete the sale of the asset have been initiated;
•Sale of the asset is probable and the Company expects the completed sale will occur within one year; and
•The asset is actively being marketed for sale at a price that is reasonable given its current market value.
Upon designation as an asset held for sale, the Company records the carrying value of each asset at the lower of its carrying value or its estimated fair
value, less estimated costs to sell, and ceases recording depreciation. If at any time these criteria are no longer met, subject to certain exceptions, the assets
previously classified as held for sale are reclassified as held and used and measured individually at the lower of the following:
a. the carrying amount before the asset was classified as held for sale, adjusted for any depreciation (amortization) expense that would have
been recognized had the asset been continuously classified as held and used;
b. the fair value at the date of the subsequent decision not to sell.
Valuation of Intangibles and Long-Lived Assets
The Company evaluates the potential impairment of property and equipment and other long-lived assets, including franchise rights and other definite-
lived intangibles, on an annual basis or whenever an event or other circumstances indicates that the Company may not be able to recover the carrying value of
the asset. Recoverability is measured based on net, undiscounted expected cash flows. Assets are considered to be impaired if the net, undiscounted expected
cash flows are less than the carrying amount of the assets. Impairment charges are recorded based upon the difference between the carrying value and the fair
value of the asset. During the year ended December 31, 2012, the Company recognized an impairment loss totaling $0.2 million on the franchise rights
recorded in conjunction with its India acquisition. The franchise rights were determined to
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