Comfort Inn 2014 Annual Report Download - page 79

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Table of Contents
and the Company adopted this ASU on January 1, 2014. The adoption of this ASU did not have a material impact on the Company's financial statements.
In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists" ("ASU 2013-11"). ASU 2013-11 requires an entity to present an unrecognized tax benefit as a reduction of a
deferred tax asset for a net operating loss ("NOL") carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain
tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax
asset for that purpose. The ASU does not require new recurring disclosures. The provisions of ASU 2013-11 are effective prospectively for fiscal years, and
interim periods within those years, beginning after December 15, 2013. The Company adopted this ASU on January 1, 2014 and the adoption of this ASU did
not have a material impact on its financial statements.
 
Other current assets consist of the following at:





Notes receivable (See Note 3)  
$ 12,816
Prepaid expenses 
13,746
Other current assets
3,148
Total  
$ 29,710
 
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 strategic markets. 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
collectibility 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 the Company 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 loan will be collected as scheduled in the loan agreement. The Company measures loan
impairment based on the present value of expected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the
collateral. For impaired loans, the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the
present value of the expected future cash flows or the estimated fair value of the collateral. The Company applies its loan impairment policy individually to
all mezzanine and other notes receivable in the portfolio and does not aggregate loans for the purpose of applying such policy. For impaired loans, the
Company recognizes interest income on a cash basis. If it is likely that a loan will not be collected based on financial or other business indicators, it is the
Company’s policy to charge off these loans to SG&A expenses in the accompanying consolidated statements of income in the quarter when it is deemed
uncollectible. Recoveries of impaired loans are recorded as a reduction of SG&A expenses in the quarter received.
The Company assesses the collectibility of its senior notes receivable by comparing the market value of the underlying assets to the carrying value of
the outstanding notes. In addition, the Company evaluates the property’s operating performance,
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