| Summary of Principal Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2019 |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of presentation The consolidated financial statements of the Group have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). |
| Basis of Consolidation | Basis of consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries and the consolidated VIEs for which the Company is the ultimate primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation. The Group evaluates its business activities and arrangements with the entities that operate the franchised-and-managed hotels to identify potential variable interest entities. Generally, these entities qualify for the business scope exception; therefore, consolidation is not appropriate under the variable interest entity consolidation guidance. |
| Variable Interest Entities | Variable Interest Entities The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company is deemed as the primary beneficiary of and consolidates variable interest entities when the Company has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. |
| Use of Estimates | Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences could be material to the consolidated financial statements. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include allowance for doubtful accounts receivable, impairment of loans receivable, fair value measurement and impairment of investments, the useful lives and impairment of property and equipment and intangible assets, valuation allowance for deferred tax assets, impairment of goodwill, average life of memberships, estimates involved in the accounting for its membership program, contingent liabilities, purchase price allocation and share-based compensation arrangements (Note 16). |
| Cash and Cash Equivalents | Cash and cash equivalents Cash and cash equivalents include cash on hand and time deposits placed with commercial banks or other financial institutions. The Group considers highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase of three months or less to be cash equivalents. All cash and cash equivalents are unrestricted as to withdrawal and use. |
| Restricted Cash | Restricted cash Restricted cash comprise of deposits pledged with banks as security in relation to the guarantee for lease agreement, the guarantees for short-term debt (Note 11) and the guarantees for prepaid cards. |
| Investments | Investments Short-term investments Short-term investments consist of investments in wealth management products, where certain deposits with variable interest rates or where principal amounts are not guaranteed, are placed with certain financial institutions. The Group accounts for short-term investments in debt in accordance with ASC topic 320, Investments — Debt investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. Available-for-sale investments are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. Realized gains or losses are included in earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale securities is recognized in the consolidated statements of income when the decline in value is determined to be other-than-temporary. The Group accounts for its investments in equity securities in accordance with ASC Subtopic 321 (“ASC 321”), Investments – Equity Securities. These securities are generally held for resale in anticipation of short-term market movements and therefore the Group classifies them as investment in equity securities in current assets which are carried at fair value at each balance sheet date. Gains and losses, both realized and unrealized, are included in gains (losses) from these securities in the consolidated statements of comprehensive income. The realized losses of RMB 22,565,408 was recognized for the year ended December 31, 2017 and the realized gains of RMB 14,381,423 and RMB 70,390,093(USD 10,110,904) were recognized for the years ended December 31, 2018 and 2019, respectively. For the years ended December 31, 2017, 2018 and 2019, there were unrealized losses of RMB 36,599,813, RMB72,156,375 and RMB29,832,919 (USD 4,285,231) respectively. Long-term investments The Group’s long-term investments consist of equity-method investments, equity investments with readily determinable fair values and equity investments without readily determinable fair values. Investments in entities in which the Group can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures Investments in equity securities that have readily determinable fair values (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are measured at fair value, with unrealized gains and losses from fair value changes recognized in net income in the consolidated statements of comprehensive income. As of December 31, 2018 and 2019, there were unrealized gains of nil and RMB 6,473,358 (USD929,840) respectively. For investments in equity securities without readily determinable fair values, the Group elected to use the measurement alternative to measure such investments at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the investment. Prior to the adoption of ASU 2016-01 on January 1, 2019, these investments were accounted for using the cost method of accounting, measured at cost less other-than-temporary impairment. As of December 31, 2019, one of the investments was remeasured based on observable price changes in orderly transactions for an identical or similar investment of the same issuer. Accordingly, the Group recognized unrealized gains of RMB 8,223,212 (USD1,181,190). No impairment loss was recognized in any of the periods presented. |
| Accounts Receivable, Net of Allowance for Doubtful Accounts | Accounts receivable, net of allowance for doubtful accounts Trade receivables mainly consist of franchise fees receivable, rental amounts due from individual and corporate customers and travel agents, and sublease rental receivables due from third-party merchandisers, which are recognized and carried at the original invoice amounts less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific franchisees, customers, and merchandisers. Accounts receivable balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. |
| Inventories | Inventories Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables are expensed when used. |
| Loans Receivable | Loans receivable Loans receivable are carried at the original loan principal and accrued interest based on the contract rate, less an allowance for uncollectible accounts, as appropriate. The allowance for uncollectible accounts is estimated based on an assessment of the payment history, the existence of collateral, current information and events, and the facts and circumstances around the credit risk of the debtors. |
| Property and Equipment, Net | Property and equipment, net Property and equipment, net are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line method over the following expected useful lives:
Leasehold improvements
Over the shorter of the lease term or estimated useful lives
Buildings
20 years
Furniture, fixtures and equipment
3-5 years
Motor vehicles
5 years Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. Expenditures for repairs and maintenance are expensed as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions to the related assets |
| Intangible Assets | Intangible assets Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion, and are measured at fair value upon acquisition. Favorable leases from such business combination transactions are amortized over the remaining operating lease term. Reacquired rights represent the franchise right the Group previously granted to the acquiree through franchise agreements and are amortized over the next renewal date in the applicable agreement. Amortization is computed using the straight-line method over the following estimated useful lives:
Trademark
10 years or indefinite life
Technology
10 years
Network rights
10 years
Purchased software
5 years
Favorable leases
the remaining lease term
Reacquired rights
the remaining franchise term The trademarks acquired in the acquisition of Argyle Group and Urban Hotel Group (Note 3) can be renewed without substantial obstacles. As a result, the useful life is determined to be indefinite. The Group evaluates the trademark at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. |
| Business Combinations | Business combinations The Group accounts for all business combinations under the purchase method in accordance with ASC 805, Business Combinations The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and noncontrolling interest is based on various assumptions and valuation methodologies requiring considerable judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Group determines discount rates to be used based on the risk inherent in the acquiree’s current business model and industry comparisons. Although the Group believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from forecasted amounts and the differences could be material. |
| Goodwill | Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group’s goodwill at December 31, 2018 and 2019 was related to its acquisition of subsidiaries and business. The Group follows ASC subtopic 350-20, Intangibles-Goodwill and Other: Goodwill. Goodwill and business acquired in a business combination are not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate a possible impairment may exist. In accordance to ASC 350-20, the Group has assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has one reporting unit, which is also its only reportable segment. The Group has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test in accordance with ASC 350-20, Testing Goodwill for Impairment. If the Group believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of the reporting unit, goodwill is not impaired and the Group is not required to perform further testing. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss. In 2017, 2018 and 2019, the Group performed a qualitative assessment for the reporting unit. Based on the requirements of ASC350-20, the Group evaluated all relevant factors, weighed all factors in their entirety and concluded that it was not more-likely-than-not the fair value was less than the carrying amount of the reporting unit, and further impairment testing on goodwill was not necessary. |
| Impairment of Long-lived Assets | Impairment of long-lived assets The Group evaluates impairment of its long-lived assets to be held and used, including property and equipment, definite-lived intangible assets and other non-current assets, when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable in accordance with ASC subtopic 360-10, Property, Plant and Equipment-Overall |
| Revenue Recognition | Revenue recognition Leased and owned hotel revenues Revenues from leased-and-operated hotels are primarily derived from hotel operations, including the rental of rooms and food and beverage sales. Each of these products and services represents an individual performance obligation and, in exchange for these services, the Group receives fixed amounts based on fixed rates or fixed standalone selling price. Revenue is recognized when rooms are occupied, and food and beverages are sold as the respective performance obligations are satisfied. Sublease rental revenues are derived from subleasing partial space of the leased-and-operated hotels to third-parties, which are recognized on a straight-line basis over the contractual lease term. The sublease rental revenue is recorded in leased-and-operated hotels revenue in the consolidated statements of comprehensive income amounted to RMB42,218,264, Franchise and managed hotel revenues The franchise and managed agreement contains the following promised services:
•
Intellectual Property (“IP”) license grant the right to access the Group’s hotel system IP, including brand names.
•
Pre-opening services include providing services (e.g., property design, leasehold improvement, construction project management, systems installation, personnel recruiting and training, etc.) to the franchisees to assist in preparing for the hotel opening.
•
System maintenance services include providing standardization hotel property management system (PMS), central reservation system (CRS) and other internet related services.
•
Hotel management services include providing day-to-day management services of the hotels for the franchisees. The promises to provide pre-opening services and system maintenance services are not distinct performance obligation because they are attendant to the license of IP. Therefore, the promises to provide pre-opening services and system maintenance services are combined with the license of IP to form a single performance obligation. Hotel management services forms a single distinct performance obligation. Revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay (i) an initial one-time non-refundable franchise fee, and (ii) continuing franchise fees, which mainly consist of on-going management and service fees based on a certain percentage of the room revenues of the franchised-and-managed hotels and central reservation system (“CRS”) usage fee based on a fixed rate per transaction. For franchised-and-managed hotels, we have a performance obligation to provide franchisees a license to our hotel system intellectual property for use of certain of our brand names. The one-time franchise fees are fixed consideration payable upon submission of a franchise application or renewal and are recognized on a straight-line basis over the initial or renewal term of the franchise agreements. The Group does not consider this advance consideration to include a significant financing component, since it is used to protect the Group from the franchisees failing to adequately complete some or all of its obligations under the contract. The continuing fees represent variable consideration, as the transaction price is based on a percentage of underlying service revenue is recognized by the franchisees’ operations. The Group recognizes continuing franchise fees on a monthly basis over the term of the agreement as those amounts become payable. In addition, the Group designates hotel managers to certain hotels and accounts for hotel manager fees related to the hotels under the franchise program as revenues. Pursuant to the franchise-and-management agreements, the Group charges the franchisees fixed hotel manager fees to compensate the Group for the franchised-and-managed hotel managers’ salaries, social welfare benefits and certain other out-of-pocket expenses as incurred. The hotel manager fee is recognized as revenue on a monthly basis. During the years ended 2017, 2018 and 2019, the hotel manager fees that were recognized as part of franchised-and-managed hotels revenue were RMB83,482,652, RMB99,185,965 and RMB115,638,242 (USD 16,610,394), respectively. |
| Membership Program | Membership Program The Group invites its customers to participate in a membership program with four tiers of membership – E-membership, R-membership, gold membership and platinum membership. A one-time membership fee is charged for new members except for the E-membership. The membership automatically expires after two years in the event of non-usage and is automatically renewed if used at least once within a two-year period. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership points for their paid stays, which can be redeemed for membership upgrades, room night awards and other gifts within two years after the points are earned. Membership Program (continued) Membership fees from the Group’s membership program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be three to five years depending on membership level. Membership points earned by members represent a material right to free or discounted goods or services in the future. The membership program has one performance obligation that consists of marketing and managing the program and arranging for award redemptions by members. . The amount of revenue the Group recognize upon point redemption is impacted by the estimate of the “breakage” for points that members will never redeem . The Group estimates breakage based on the Group’s historical experience and expectations of future member behavior and will true up the estimated breakage at end of each period. |
| PRC Value-Added Taxes and Related Tax Surcharges | PRC Value-Added Taxes and related tax surcharges Starting from May 2016, the accommodation services of the Group are subject to 6% of Value-Added Taxes. The Group is subject to education surtax and urban maintenance and construction tax, on the services provided in the PRC. |
| Advertising and Promotional Expenses | Advertising and promotional expenses Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB11,369,822, RMB15,654,573 and RMB 23,934,351 (USD3,437,954) for the years ended December 31, 2017, 2018 and 2019, respectively. |
| Government Subsidies | Government subsidies Government subsidies are received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. During the years ended December 31, 2017, 2018 and 2019, the Group received financial subsidies of RMB10,220,995, RMB15,150,107 and RMB9,880,735(USD1,419,279), respectively, from various local PRC government authorities. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Such amounts are recorded as other operating income when received as the amount of the subsidies and the timing of payment are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue to receive any or similar subsidies in the future. |
| Interest Income and Other, Net | Interest income and other, net Interest income and other, net consists primarily of interest income, and to a much lesser extent foreign exchange gains or losses. Interest income is mainly generated from bank deposits and other interest earning financial assets and is recognized on an accrual basis using the effective interest method. |
| Leases | Leases Leases are classified as capital or operating leases. A lease that transfers to the lessee substantially all the benefits and risks incidental to ownership is classified as a capital lease. The Group did not have any leases that qualified as capital leases for the years ended December 31, 2018 and 2019. The Group leases hotel space under certain operating lease agreements. Certain of the lease agreements contain rent holidays and rent escalation provisions. Rent holidays and rent escalation provisions are considered in determining straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. The excess of rent expense and rent paid, as the case may be for respective leases, is recorded as deferred rent. Rental expenses amounted to RMB60,839,102, RMB78,272,335 and RMB81,379,034 (USD11,689,367) for the years ended December 31, 2017, 2018 and 2019, respectively. |
| Income Taxes | Income taxes Income taxes are provided for using the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or change in tax status is recognized in income in the period the change in tax status occurs or the change in tax rates or tax law is enacted. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some or all of the deferred tax assets will not be realized. In accordance with ASC subtopic 740-10, Income Taxes, Overall The Group estimates its liability for unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit or appeal or litigation process. The actual benefits ultimately realized may differ from the Group’s estimates. As each tax audit is concluded, adjustments, if any, are recorded in the Group’s financial statements. Additionally, in future periods, changes in facts, circumstances and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Group has elected to include interest and penalties related to an uncertain tax position in “income tax expense (benefit)” in the consolidated statements of comprehensive income. For the annual period ended December 31, 2018, the Company adopted ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, and classified all deferred income tax assets as noncurrent on the consolidated balance sheets on a prospectively basis. |
| Foreign Currency Translation and Transactions | Foreign currency translation and transactions The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company, GreenTree Samoa, GreenTree Suites, PHI and the entities incorporated in Hong Kong is the United States dollar (“USD”). The financial records of PRC subsidiaries of the Company are maintained in the local currency, the Renminbi (“RMB”), which is their functional currency. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are re-measured into the applicable functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional currencies during the year are converted into the functional currencies at the applicable rates of exchange prevailing on the transaction dates. Transaction gains and losses are recognized in “interest income and other, net” in the consolidated statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rate at the balance sheet date. Equity accounts are translated at historical exchange rates, and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income (loss) in the consolidated statements of comprehensive income. |
| Convenience Translation | Convenience translation Translations of amounts from RMB into U.S. dollars and HKD into U.S. dollars are solely for the convenience of the reader and were calculated at the noon buying rate of USD1 to RMB6.9618 and USD1 to HKD7.7894 on December 31, 2019, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on December 31, 2019, or at any other rate. |
| Fair Value | 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) Fair value Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Group follows ASC subtopic 820-10, Fair Value Measurements and Disclosures, which establishes a three-tier fair value hierarchy, and prioritizes the inputs used in measuring fair value as follows: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Investments in equity securities with readily determinable fair values are measured using quoted market prices, and are recorded at fair values at each balance sheet date. The Group measures equity investments without readily determinable fair value and elected to use the measurement alternative at fair value on a nonrecurring basis, in the cases of an impairment charge is recognized, fair value of an investment is remeasured in an acquisition/a disposal, and an orderly transaction for identical or similar investments of the same issuer was identified. The non-recurring fair value measurements to the carrying amount of an investment usually requires management to estimate a price adjustment for the different rights and obligations between a similar instrument of the same issuer with an observable price change in an orderly transaction and the investment held by the Company. The valuation methodologies involved require management to use the observable transaction price at the transaction date and other unobservable inputs (level 3) such as volatility of comparable companies and probability of exit events as it relates to liquidation and redemption preferences. 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) Fair value (continued) The payable for contingent consideration and the returnable consideration from Urban Hotel Group are classified within Level 3, which are based on the achievement of certain financial targets in accordance with the acquisition agreements for the various periods. The carrying values of other financial instruments, which consist of cash and cash equivalents, accounts receivable, loans receivable, amounts due from related parties, accounts payable and amounts due to related parties are recorded at cost which approximates their fair value due to the short-term nature of these instruments. The Group does not use derivative instruments to manage risks. The following table summarizes the Company’s financial assets and liabilities measured and recorded at fair value as of December 31, 2018 and 2019:
Fair Value Measurements at Reporting Date Using
Description
As of December 31, 2018
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Investments in equity securities with readily determinable fair value
307,693,782
307,693,782
Short-term investments
685,512,063
685,512,063
993,205,845
307,693,782
685,512,063
Fair Value Measurements at Reporting Date Using
Description
As of December 31, 2019
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Returnable consideration from Urban Hotel Group (Note 3)
3,333,421
3,333,421
Investments in equity securities with readily determinable fair value
207,007,926
207,007,926
Short-term investments
437,279,026
437,279,026
Long-term investments – equity securities with readily determinable fair values
262,833,287
262,833,287
Payables for contingent consideration from Urban Hotel Group (Note 3)
4,027,207
4,027,207
914,480,867
469,841,213
437,279,026
7,360,628 |
| Comprehensive Income | Comprehensive income Comprehensive income is defined as the increase in equity of the Group during a year from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Accumulated other comprehensive gain of the Group includes the foreign currency translation adjustments. |
| Segment Reporting | Segment reporting The Group operates and manages its business as a single segment. The Group’s chief operating decision maker has been identified as the CEO of the Group. The results of operations of the Group are regularly reviewed by the Chief Executive Officer on a consolidated basis. The Group primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented. Substantially all of the Group’s long-lived assets are located in the PRC. |
| Comparative Information | Comparative information Certain of the prior year comparative figures have been reclassified to conform to the current year’s presentation. |
| Employee Benefits | Employee benefits The full-time employees of the Group’s PRC subsidiaries participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiary of the Group to make contributions to the government for these benefits beyond the contribution made. The total amounts for such employee benefits, which were expensed as incurred, RMB22,859,925, RMB22,289,686 and RMB28,700,397 (USD4,122,554) for the years ended December 31, 2017, 2018 and 2019, respectively. |
| Share-based Compensation | Share-based compensation Share based awards granted to employees are accounted for under ASC 718, “Compensation—Stock Compensation”, which requires that such equity awards granted to employees be measured based on the grant date fair value and recognized as compensation expense a) immediately at grant date if no vesting conditions are required; or b) using accelerated method, net of estimated forfeitures, over the requisite service period, which is the vesting period. |
| Earnings Per Share | Earnings per share Class A and Class B ordinary shares have the same rights with regard to dividends and distributions upon liquidation of the Group. Net income is allocated on a pro rata basis to the Class A and Class B ordinary shares to the extent that each class shares in income for the period. Basic EPS for each class of ordinary shares is computed by dividing net income attributable to that class by the weighted average number of ordinary shares outstanding of that class for the period. Diluted earnings per share is calculated by dividing net income attributable to the Class A and Class B ordinary shares as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary share equivalents are excluded from the computation of diluted per share if their effects would be anti-dilutive. Contingently issuable shares relating to shares to be issued as a part of purchase consideration associated with business combinations, are included in the computation of basic earnings per share only when there is no circumstance under which those shares would not be issued. Contingently issuable shares are included in the denominator of the diluted EPS calculation as of the beginning of the period or as of the inception date of the contingent share arrangement, if later, only when dilutive and when all the necessary conditions have been satisfied as of the reporting period end. |
| Concentration of Credit Risk | Concentration of credit risk Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, amounts due from related and loans receivable. As of December 31, 2018, the Group had RMB538,780,644, RMB 721,573,480 and RMB5,621,368 held in cash and bank deposits by entity located in the PRC, Cayman Island and Hong Kong, respectively. As of December 31, 2019, the Group had RMB 267,063,036 (USD38,361,205), RMB72,645,289 (USD10,434,843), RMB410,523 (USD58,968) and RMB 165,850 (USD23,823) held in cash and bank deposits by entity located in the PRC, Cayman Island and Hong Kong, respectively. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions. The Group conducts credit evaluations on its customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. The Group made loans to existing franchisees, third-party individuals and corporates under loan agreements and is exposed to credit risk in case of defaults by the debtors. The maximum amount of loss due to credit risk is limited to the total outstanding principal plus accrued interest on the balance sheet date. As of December 31, 2018 and 2019, there were RMB106,549,431 and RMB218,875,943 (USD31,439,562) of loans receivable outstanding. The Group evaluates and monitors the credit worthiness of the debtors and records an allowance for uncollectible accounts based on an assessment of the payment history, the existence of collateral, current information and events, and the facts and circumstances around the credit risk of the debtor. During the years ended December 31, 2017, 2018 and 2019, the Group recognized an allowance of doubtful debts of nil, nil and RMB15,000,000 (USD2,154,615), respectively. |
| Currency Convertibility Risk | Currency Convertibility Risk Substantially all of the Group’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized by the PRC government to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. |
| Foreign Currency Exchange Rate Risk | Foreign Currency Exchange Rate Risk The functional currency of the Company is USD, and the reporting currency is RMB. Since July 21, 2005, RMB has been permitted by the PRC government to fluctuate within a managed band against a basket of certain foreign currencies. The appreciation of the USD against RMB in 2018 was approximately 5.7% and the appreciation is 1.3% in 2019, respectively. Any significant revaluation of RMB may materially and adversely affect the cash flows, operating results and financial position of the Group. As a result, an appreciation of RMB against USD would result in foreign currency translation loss when translating the net assets of the Group from USD into RMB. For the years ended December 31, 2017, 2018 and 2019, the net foreign currency translation gain resulting from the translation from USD to RMB reporting currency recorded in other comprehensive income was RMB1,317,020, RMB66,453,841 and RMB2,933,162 (USD421,322), respectively. |
| Adopted Accounting Standards | Adopted Accounting Standards As a company with less than USD1.07 billion in revenue for the last fiscal year, the company qualifies as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include a provision that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. The Company has adopted the extended transition period. 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) Adopted Accounting Standards (continued) The Group adopted the ASU 2014-09 and all related ASUs (collectively, the “new revenue standards”) on January 1, 2019 utilizing the full retrospective basis in the consolidated financial statements, which required the Group to adjust each prior reporting period presented. The adoption of new revenue standards impacted the timing of revenue recognition related to initial franchise fee from upon the opening of hotels to over the term of the franchise contract. In addition, the adoption of new revenue standards also impacted the accounting of the membership program. Under previous guidance, the Group adopted the incremental cost model to account for membership program. The estimated incremental costs are accrued and recorded as accruals for membership program as members accumulate points and are recognized as selling and marketing expense in the accompanying consolidated statements of comprehensive income. Upon adoption of new revenue standards, membership program is considered a separate performance obligation and the consideration allocated to the membership program will be recognized as revenue upon point redemption, net of any cost paid to the franchisees and other third parties. The impact of the changes made to the Group’s consolidated financial statements as a result of the adoption of new revenue standards was as follows:
For the Year ended December 31, 2017
For the Year ended December 31, 2018
As Reported
Effect of the Adoption of New Revenue Standards
As Adjusted
As Reported
Effect of the Adoption of New Revenue Standards
As Adjusted
Revenues:
Leased-and-operated hotels
193,542,455
(500,000
)
193,042,455
213,172,025
(500,095
)
212,671,930
Franchised-and-managed hotels
584,589,358
(34,456,414
)
550,132,944
731,833,909
(38,891,170
)
692,942,739
Total revenues
778,131,813
(34,956,414
)
743,175,399
945,005,934
(39,391,265
)
905,614,669
Operating costs and expenses:
Hotel operating costs
(233,646,052
)
6,779,023
(226,867,029
)
(280,954,345
)
6,535,082
(274,419,263
)
Selling and marketing expenses
(45,032,441
)
12,229,540
(32,802,901
)
(50,393,151
)
2,995,384
(47,397,767
)
Total operating costs and expenses
(405,965,433
)
19,008,563
(386,956,870
)
(432,554,874
)
9,530,466
(423,024,408
)
Income from operations
387,450,208
(15,947,851
)
371,502,357
535,021,866
(29,860,799
)
505,161,067
Income before income taxes
472,602,371
(15,947,851
)
456,654,520
562,100,340
(29,860,799
)
532,239,541
Income tax expense
(186,651,155
)
4,082,893
(182,568,262
)
(160,185,845
)
7,467,177
(152,718,668
)
Net income
285,051,632
(11,864,958
)
273,186,674
393,613,911
(22,393,622
)
371,220,289
Net income attributable to ordinary shareholders
285,400,182
(11,864,958
)
273,535,224
394,104,841
(22,393,622
)
371,711,219
Earnings per share:
Basic
3.12
(0.13
)
2.99
3.97
(0.22
)
3.75
Diluted
3.12
(0.13
)
2.99
3.97
(0.22
)
3.75
As of December 31, 2018
As Reported
Effect of the Adoption of New Revenue Standards
As Adjusted
Deferred tax assets
67,909,969
65,390,997
133,300,966
Total assets
3,014,390,010
65,390,997
3,079,781,007
Deferred revenue – current
153,389,895
57,195,709
210,585,604
Accrued expenses and other current liabilities
264,058,985
(22,651,006
)
241,407,979
Deferred revenue – noncurrent
145,545,929
234,627,656
380,173,585
Total liabilities
1,151,261,579
269,172,359
1,420,433,938
Retained earnings
456,398,812
(203,781,362
)
252,617,450
Total equity
1,863,128,431
(203,781,362
)
1,659,347,069
Total liabilities and equity
3,014,390,010
65,390,997
3,079,781,007
2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) Recently issued accounting pronouncements (continued) In January 2016, the FASB issued ASU No. 2016-01, which improves the recognition and measurement of financial instruments. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income and separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, including interim periods beginning after December 15, 2019. The Group adopted the ASU effective January 1, 2019. No cumulative impact was recognized as of January 1, 2019. In November 2016, the FASB issued ASU 2016-18, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. Under ASU 2016-18, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. As a result of this update, restricted cash are included within cash and cash equivalents on the statements of consolidated cash flows. The Group adopted the ASU 2016-18 effective January 1, 2019 retrospectively and presented restricted cash within the ending cash, cash equivalents, and restricted cash balance on the Group’s consolidated statements of cash flows for all of the years presented. The balance of restricted cash of RMB3,000,000, RMB3,300,000 and RMB22,312,522 are included within the beginning balance of cash, cash equivalents, and restricted cash on the statements of consolidated cash flows for the years ended December 31, 2017, 2018 and 2019, respectively. In January 2017, the FASB issued ASU 2017-01, Business Combinations Accounting Standards Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, or ASU 2018-10, to supersede ASU 2016-02. In addition, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , that provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic 840, Leases). pdated guidance is In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) Accounting Standards Not Yet Adopted (continued) In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment Accounting Standards Not Yet Adopted (continued) In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. This standard is effective for the Group for the annual reporting periods beginning January 1, 2022 and interim periods beginning January 1, 2023. Early adoption is permitted. The Group is in the process of evaluating the impact of adoption of this guidance on the Group’s consolidated financial statements. In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities Investments-Equity Method and Joint Ventures Derivatives and Hedging |
