What depreciation method does Aira Fitness use in its financial statements, and how does it differ from generally accepted accounting principles?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
butions) | | - | | (11,000) | (11,000) | | Balance, December 31, 2024 | $ | 29,335 | $ | (33,591) | $ (4,257) |
NOTE A – ORGANIZATION AND NATURE OF ACTIVITIES
AIRA FITNESS FRANCHISING LLC (the "Company") was incorporated under the laws of the State of Illinois for the purpose of offering franchise opportunities to entrepreneurs who want to own their own 'AIRA FITNESS' location, as a franchise.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). As a result, the Company records revenue when earned and expenses when incurred. The Company has adopted the calendar year as its basis of reporting.
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities and other items, as well as the reported revenues and expenses. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and any cash equivalents include all cash balances, and highly liquid investments with maturities of three months or less when purchased.
Franchisee Receivables
The Company's franchisee receivables primarily result from initial franchise fees, royalty fees, brand development contributions and training fees charged to franchisees. Timing of revenue recognition may be different from the timing of invoicing to customers. The Company records an accounts receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized after invoicing. The Company reports these receivables at net realizable value.
Management determines the allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. On a continuing basis, management analyzes delinquent accounts receivable and, once these accounts receivable are determined to be uncollectible, they are written off through a charge against an existing allowance account. The allowance account is reviewed regularly and adjusted against earnings as appropriate.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the excerpts provided do not contain information regarding the specific depreciation method used by Aira Fitness in its financial statements. The excerpts detail the company's accounting policies, including the basis of presentation in accordance with US GAAP, revenue recognition, use of estimates, cash and cash equivalents, and franchisee receivables. It also mentions that the company intends to elect to be an S-Corporation for tax purposes.
While the FDD excerpts outline several accounting policies, the absence of details about depreciation methods means a prospective franchisee cannot assess how Aira Fitness accounts for the depreciation of its assets. Depreciation methods can impact the reported financial performance and tax liabilities, so understanding this is important.
To gain a comprehensive understanding of Aira Fitness's accounting practices, a potential franchisee should ask the franchisor directly about the depreciation methods used for various asset classes. Further, they should seek clarification on how these methods align with generally accepted accounting principles and how they might affect the franchisee's financial reporting and tax obligations.