Immaterial Corrections to Prior Period Financial Statements

12 Months Ended

Dec. 31, 2020

Immaterial Corrections to Prior Period Financial Statements

Immaterial Corrections to Prior Period Financial Statements

17. Immaterial Corrections to Prior Period Financial Statements

On July 21, 2021, the Company acquired the operating companies of the North America regions of RE/MAX INTEGRA (“INTEGRA”) converting INTEGRA’s formerly Independent Regions into Company-Owned Regions. In analyzing the purchase accounting with respect to the acquisition of INTEGRA, the Company determined that a portion of the acquisition purchase price was attributable to a loss on the settlement of the pre-existing master franchise agreements in which the pre-acquisition royalty rates paid by INTEGRA were below the current market rate. This is in contrast to prior Independent Region acquisitions where the Company allocated the entire purchase price to acquired assets, primarily goodwill and other identifiable intangible assets. The Company has determined this same conclusion applied to certain other Independent Regions acquired between 2007 and 2017 where the region paid a royalty rate below the market rate as of the acquisition date. In these circumstances, the Company failed to recognize a loss on settlement of the master franchise contract in the year of acquisition, which caused overstated goodwill and identifiable intangible assets and generally overstated levels of intangible asset amortization expense subsequent to acquisition. The control deficiencies that led to these errors were deemed to constitute a material weakness in the Company’s internal control over financial reporting.

Accordingly, management is correcting the relevant consolidated financial statements and related footnotes as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 within these consolidated financial statements. Management has evaluated the materiality of these misstatements based on an analysis of quantitative and qualitative factors and concluded they were not material to the prior period financial statements, individually or in aggregate.

	As of December 31,
	2020				2019
	As previously				As previously
	reported		As adjusted		reported		As adjusted
Franchise agreements, net	$	72,196	$	69,802	$	87,670	$	84,691
Goodwill	$	175,835	$	165,358	$	159,038	$	148,561
Deferred tax assets, net	$	48,855	$	50,702	$	52,595	$	54,501
Total assets	$	557,392	$	546,368	$	542,352	$	530,802
Retained earnings	$	25,139	$	25,628	$	30,525	$	30,732
Non-controlling interest	$	(404,494)	$	(416,007)	$	(399,510)	$	(411,267)
Total stockholders' equity	$	112,681	$	101,657	$	98,376	$	86,826

	For the Year Ended December 31,
	2020				2019				2018
	As previously				As previously				As previously
	reported		As adjusted		reported		As adjusted		reported		As adjusted
Depreciation and amortization	$	26,691	$	26,106	$	22,323	$	21,792	$	20,678	$	20,121
Operating income	$	38,008	$	38,593	$	68,439	$	68,970	$	77,851	$	78,408
Income before provision for income taxes	$	29,123	$	29,708	$	57,765	$	58,296	$	66,164	$	66,721
Provision for income taxes	$	(9,103)	$	(9,162)	$	(10,909)	$	(10,982)	$	(16,342)	$	(16,419)
Net income	$	20,020	$	20,546	$	46,856	$	47,314	$	49,822	$	50,302
Less: net income attributable to non-controlling interest	$	9,056	$	9,296	$	21,816	$	22,034	$	22,939	$	23,168
Net income attributable to RE/MAX Holdings, Inc.	$	10,964	$	11,250	$	25,040	$	25,280	$	26,883	$	27,134
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic	$	0.60	$	0.62	$	1.41	$	1.42	$	1.52	$	1.53
Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted	$	0.60	$	0.61	$	1.40	$	1.41	$	1.51	$	1.53