Comfort Inn 2013 Annual Report Download - page 87

Table of Contents
Other identifiable intangible consist of the cost of registering and renewing existing trademarks and acquiring new trademarks. The costs of registering
and renewing existing trademarks are being amortized primarily over ten years. Approximately $1.0 million of the Company's outstanding trademarks pertain
to the Company's acquisition of the Suburban brand. These trademarks were determined to have an indefinite life and therefore, no amounts have been
amortized. Amortization expense for each of the years ended December 31, 2013, 2012 and 2011 amounted to $0.5 million. Trademarks are net of
accumulated amortization of $7.5 million and $6.9 million at December 31, 2013 and 2012, respectively.
The estimated annual amortization expense related to the Company’s trademarks for each of the years ending December 31, 2014 through 2018 is as
follows:
 
2014 $ 0.5
2015 $ 0.5
2016 $ 0.4
2017 $0.4
2018 $0.3

The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees. The Company is
obligated to use the marketing and reservation system revenues it collects from the current franchisees comprising its various hotel brands to provide
marketing and reservation services appropriate to support the operation of the overall system. In discharging its obligation to provide sufficient and appropriate
marketing and reservation services, the Company has the right to expend funds in an amount reasonably necessary to ensure the provision of such services,
whether or not such amount is currently available to the Company for reimbursement. The franchise agreements provide the Company the right to advance
monies to the franchise system when the needs of the system surpass the balances currently available. As a result, expenditures by the Company in support of
marketing and reservation services in excess of available revenues are deferred and recorded as an asset in the Company’s financial statements. Conversely,
cumulative marketing and reservation system revenues not expended are recorded as a liability in the financial statements and are carried over to the next fiscal
year and expended in accordance with the franchise agreements or utilized to reimburse the Company for prior year advances.
Under the terms of these agreements, the Company has the contractually enforceable right to assess and collect from its current franchisees, fees
sufficient to pay for the marketing and reservation services the Company has procured for the benefit of the franchise system, including fees to reimburse the
Company for past services rendered. The Company has the contractual authority to require that the franchisees in the system at any given point repay any
deficits related to marketing and reservation activities. The Company’s current franchisees are contractually obligated to pay any assessment the Company
imposes on its franchisees to obtain reimbursement of such deficit regardless of whether those constituents continue to generate gross room revenue and
whether or not they joined the system following the deficit's occurrence.
At December 31, 2013 and 2012 , the Company had incurred marketing and reservation system expenses in excess of cumulative marketing and
reservation system fees earned of $19.1 million and $42.2 million, respectively. Depreciation and amortization expense attributable to marketing and
reservation activities for the years ended December 31, 2013, 2012 and 2011 was $16.0 million, $14.5 million and $13.3 million, respectively. Interest
expense attributable to reservation activities was $3.7 million, $4.0 million and $4.1 million for the years ended December 31, 2013, 2012 and 2011,
respectively.
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