VDC Holdco, LLC and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2022 and 2021
At December 31, 2021, $3,431,728 was recorded as contract liabilities, of which $2,332,464 was
recognized as revenue during year ended December 31, 2022. At January 1, 2021, $463,120 was recorded as contract liabilities, of which $270,531 was recognized as revenue during the year ended December 31, 2021.
Gift Card and Store Credit Liabilities and Breakage
Gift
card and store credit liabilities, a component of accrued expenses on the consolidated balance sheets, represent purchased credit for future use or credits issued and outstanding for event cancellations or other service issues related to recorded
sales transactions. The accrued amount is reduced by the amount of credits estimated to go unused, or breakage. The Company estimates breakage based on historical usage trends and recognize breakage based on the age of the gift card or store credit.
The Companys breakage estimate could be impacted by future activity differing from estimates, the effects of which could be material.
Total gift
card and store credit liability was $1,373,547, $4,511,281, and $5,570,646 as of December 31, 2022, December 31, 2021, and January 1, 2021, respectively. During the year ended December 31, 2022, $5,233,774 of gift card and store
credit liabilities were redeemed and the Company recognized $3,209,499 of breakage. During the year ended December 31, 2021, $6,789,972 of accrued customer credits were redeemed and we recognized $2,384,057 of breakage.
Sales Taxes
Various jurisdictions impose a sales tax on
the Companys sales to non-exempt customers on the use or occupancy of hotel accommodations or other traveler services. Generally, the sales tax passes through to the hotel or traveler service company who
collects taxes based on the rate paid to the hotel and remits these taxes to the various tax authorities.
Employee Retention Credit
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided an employee retention credit (the Credit) which is a
refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The Credit is equal to 50% of qualified wages paid to employees, capped at $10,000 of qualified wages through December 31, 2020.
The Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021 (collectively, the Acts) expanded the availability of the
employee retention Credit and extended the credit through December 31, 2021. The Acts increased the credit to 70% of qualified wages, capped at $10,000 per quarter, through 2021. As a result of the changes to the credit initiated through the
Acts, the maximum credit per employee increased from $5,000 in 2020 to $28,000 in 2021. The Company qualified for the additional credits in 2021.
During
the year ended December 31, 2021, the Company recorded a $325,958 benefit related to the Credit which is presented in the consolidated statements of operations as an element of other income.
Advertising Costs
Advertising costs identified as paid
search fees and marketing fees are expensed as incurred. Such costs were $25,392,915 and $14,450,952, respectively, for the years ended December 31, 2022 and 2021.
Estimates
The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Guidance
In June 2016, FASB issued accounting standards update 2016-13, Financial Instruments Credit Losses
(Topic 326), which replaces the incurred loss impairment model with a forward-looking loss model, and is applicable to most financial assets, including trade receivables other than those arising from operating leases. The amended guidance is
effective for the Company beginning January 1,
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