What was the approximate balance of the deferred gain for Aunt Millies Bakeries as of September 30, 2024?

According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the balance of the deferred gain was approximately $2,368,000 as of September 30, 2024. This deferred gain is recorded in accrued expenses (short term) and other liabilities (long term) on the consolidated balance sheets. The document also notes a deferred gain balance of approximately $2,604,000 as of September 30, 2023.

This deferred gain stems from a sale and leaseback transaction that Aunt Millies Bakeries entered into during 2020. In this transaction, the company sold land and buildings for cash totaling $4,600,000, which resulted in net proceeds approximating $4,200,000 after closing costs. Aunt Millies Bakeries then leased the property back. The original transaction resulted in a net gain on the sale of the property approximating $2,234,000, which is included in other liabilities and is being amortized over the life of the corresponding lease.

The lease is classified as an operating lease and is included in the adoption of ASC 842. The monthly lease cost began at approximately $21,551 in February 2020 and increases to $45,780 through February 2040. The lessee, Aunt Millies Bakeries, is responsible for all maintenance, insurance, and taxes on the property. Understanding the nature and accounting treatment of deferred gains is crucial for prospective franchisees to assess the financial health and obligations of Aunt Millies Bakeries.