What are two accounts in the Choice Hotels income statement that show the biggest change over...

What are two accounts in the Choice Hotels income statement that show the biggest change over the past 3 years? What information in the 10-K report helps to explain these changes?

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Expert Solution

The two accounts in the Choice Hotels income statement that shows the biggest change over the past 3 years are: (i) gain on sale of assets (ii) other (gain)/loss

(Note that in the below discussions all $ figures are in thousands)

The company’s gain on sale of assets declined by 59.01% in 2017 to $257 from $627 in 2016. In 2018 this account witnessed a decline of 68.09% to $82.

Other (gains)/losses increased by 114.69% in 2017 to ($3,229) from ($1,504) in 2016. This then declined to a loss figure of $1,437 in 2018 translating into a 144.50% decline.

The company’s 2019 10k reports states that the significant changes in gain on sale of assets took place in the last 3 years as the company sold some of its properties that it had purchased as a part of the program to incent franchise development in some markets and to pursue hotel development through joint ventures.

The company’s other (gains) and losses witnessed significant changes due to fluctuations in the fair value of investments held in the company’s non-qualified employee benefit plans.

(All the above information have been obtained from the company's latest 10k i.e. 10k filed on February 26, 2019 for the period ended December 31, 2018)

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