Regarding Atwell Suites' financial statements, what is the impact of using estimates and assumptions as required by generally accepted accounting principles?
Atwell_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported year. Actual results could differ from those estimates.
Source: Item 23 — Receipts (FDD pages 99–486)
What This Means (2025 FDD)
According to Atwell Suites' 2025 Franchise Disclosure Document, the preparation of financial statements adheres to generally accepted accounting principles (GAAP) in the United States, which necessitates that the management of Atwell Suites make estimates and assumptions. These estimates and assumptions influence the reported values of assets and liabilities, the disclosure of contingent assets and liabilities at the financial statement date, and the reported amounts of revenues and expenses during the year. This is a standard practice in accounting, as many financial elements cannot be precisely determined and require informed judgment.
For a prospective Atwell Suites franchisee, this means that the financial statements provided are not based on exact figures alone but also incorporate management's best judgments. These estimates can relate to various aspects of the business, such as the valuation of assets, the prediction of future revenues, and the assessment of potential liabilities. While these estimates are made in good faith, the FDD clearly states that actual results could differ from those estimates.
The use of estimates and assumptions introduces an inherent level of uncertainty into the financial statements. While GAAP provides a framework for making these estimates, there is still room for variability and potential error. Franchisees should be aware that the financial performance reflected in the statements is not a guarantee of future results and that unforeseen factors could impact the accuracy of these estimates. It is important for potential franchisees to carefully review the notes to the financial statements, which provide additional information about the significant accounting policies and estimates used in preparing the statements. Understanding these policies and estimates can help franchisees better assess the financial risks and opportunities associated with investing in an Atwell Suites franchise.