Comfort Inn 2014 Annual Report Download - page 94

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Table of Contents
The Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that
partially offset the earnings credited to the participants. The diversified investments held in the trusts totaled $4.6 million and $4.1 million as of December
31, 2014 and 2013, respectively, and are recorded at their fair value, based on quoted market prices. At December 31, 2014, the Company expects $0.2
million of the assets held in the trust to be distributed during the year ended December 31, 2015 to participants. These investments are considered trading
securities and therefore the changes in the fair value of the diversified assets is included in other gains and losses in the accompanying consolidated
statements of income. The Company recorded investment gains (losses) during the years ended December 31, 2014, 2013 and 2012 of $(49) thousand, $0.3
million, and $1.2 million, respectively. In addition, the EDCP Plan held shares of the Company's common stock with a market value of $0.2 million and $0.2
million at December 31, 2014 and 2013, respectively which were recorded as a component of shareholders' deficit.
In 1997, the Company adopted the Choice Hotels International, Inc. Non-Qualified Retirement Savings and Investment Plan ("Non-Qualified Plan").
The Non-Qualified Plan allows certain employees who do not participate in the EDCP to defer a portion of their salary and invest these amounts in a selection
of available diversified investment options. As of December 31, 2014 and 2013, the Company had recorded a deferred compensation liability of $14.4
million and $13.7 million, respectively related to these deferrals. Compensation expense is recorded in SG&A expense on the Company’s consolidated
statements of income based on the change in the deferred compensation obligation related to earnings credited to participants as well as changes in the fair
value of diversified investments. The net increase (decrease) in compensation expense recorded in SG&A for the years ended December 31, 2014, 2013 and
2012 were $(0.3) million, $1.7 million and $0.7 million, respectively.
The diversified investments held in the trusts were $13.1 million and $12.3 million as of December 31, 2014 and 2013, respectively, and are recorded at
their fair value, based on quoted market prices. These investments are considered trading securities and therefore the changes in the fair value of the
diversified assets are included in other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains
(losses) during the years ended December 31, 2014, 2013 and 2012 of $(0.4) million, $1.3 million and $0.8 million, respectively. In addition, the Non-
Qualified Plan held shares of the Company’s common stock with a market value of $1.3 million and $1.4 million at December 31, 2014 and 2013,
respectively.
 
The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs.
: Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of marketable securities (primarily
mutual funds) held in the Company’s EDCP and Non-Qualified Plan deferred compensation plans.
: Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and
liabilities; quoted prices in markets that are not active; or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held
in the Company’s EDCP and Non-Qualified Plan deferred compensation plans and those recorded in cash and cash equivalents.
: Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to
determine the fair value of the instrument. The Company does not currently have any assets whose fair value was determined using Level 3 inputs.
The Company's policy is to recognize transfers in and transfers out of the three levels of the fair value hierarchy as of the end of each quarterly reporting
period. There were no transfers between Level 1, 2 and 3 assets during the years ended December 31, 2014 and 2013.
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