Comfort Inn 2013 Annual Report Download - page 79

Table of Contents
be impaired as the net, undiscounted expected cash flows were less than the carrying amount of the assets. The Company did not record any impairment of
long-lived assets during the years ended December 31, 2013 and 2011. Significant management judgment is involved in developing these projections, and they
include inherent uncertainties. If different projections had been used in the current period, the balances for non-current assets could have been materially
impacted. Furthermore, if management uses different projections or if different conditions occur in future periods, future-operating results could be materially
impacted.
The Company evaluates the impairment of goodwill and trademarks with indefinite lives on an annual basis, or during the year if an event or other
circumstance indicates that the Company may not be able to recover the carrying amount of the asset. In evaluating these assets for impairment, the Company
first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the
conclusion is that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, then no further testing is required. If the
conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step impairment test is performed.
The fair value of the Company's net assets is used to determine if goodwill may be impaired. Indefinite life trademarks are considered to be impaired if the net,
undiscounted expected cash flows associated with the trademark are less than their carrying amount. During the year ended December 31, 2012, the Company
recognized an impairment loss totaling $0.2 million on the goodwill recorded in conjunction with its India acquisition. Based on the Company's assessment, it
was determined that the fair value of the Company's Indian subsidiary, was less than its carrying value resulting in the recognition of an impairment loss
equal to the gross amount of the goodwill. The Company did not record any impairment of goodwill or trademarks with indefinite lives during the years ended
December 31, 2013 and 2011.
Variable Interest Entities
In accordance with the guidance for the consolidation of variable interest entities, the Company analyzes its variable interests, including loans,
guarantees, and equity investments, to determine if the entity in which the Company has a variable interest is a variable interest entity. The analysis includes
both quantitative and qualitative reviews. For those entities determined to have variable interests, a further quantitative and qualitative analysis is performed to
determine if the Company will be deemed the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a variable
interest entity that most significantly impact the entity's economic performance and who has an obligation to absorb losses of the entity or a right to receive
benefits from the entity that could potentially be significant to the entity. The Company consolidates those entities in which it is determined to be the primary
beneficiary.
Valuation of Investments in Ventures
The Company evaluates an investment in a venture for impairment when circumstances indicate that the carrying value may not be recoverable, for
example due to loan defaults, significant under performance relative to historical or projected operating performance, and significant negative industry or
economic trends. When there is indication that a loss in value has occurred, the Company evaluates the carrying value compared to the estimated fair value of
the investment. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net
sales proceeds from pending offers. If the estimated fair value is less than carrying value, management uses its judgment to determine if the decline in value is
other-than-temporary. In determining this, the Company consider factors including, but not limited to, the length of time and extent of the decline, loss of
values as a percentage of the cost, financial condition and near-term financial projections, the Company's intent and ability to recover the lost value and
current economic conditions. For investments that are deemed other-than-temporary, impairments are charged to earnings.
Sales Taxes
The Company presents taxes collected from customers and remitted to governmental authorities on a net basis and therefore they are excluded from
revenues in the consolidated financial statements.
Foreign Operations
The United States dollar is the functional currency of the consolidated entities operating in the United States. The functional currency for the
consolidated entities operating outside of the United States is generally the currency of the primary economic environment in which the entity primarily
generates and expends cash. The Company translates the financial statements of consolidated entities whose functional currency is not the United States dollar
into United States dollars. The Company translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income
statement accounts using the weighted average exchange rate for the period. The Company includes translation adjustments from foreign exchange and the
effect of exchange rate changes on inter-company transactions of a long-term investment nature as a separate component of shareholders’ deficit. The Company
reports foreign currency transaction gains and losses and the
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