According to Aw's accounting policies, what accounting principles are followed?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
insurance limit of $250,000. The Company maintains its cash and cash equivalents with accredited financial institutions.
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.
Taxes on Income-The Company has elected to be taxed as a limited liability corporation for federal and state income tax purposes. Income and expenses for the Company pass through directly to the members' and is reported on their individual income tax returns.
3. REVENUE RECOGNITION
The Company records revenue in accordance Accounting Standards Board ("FASB") and Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied. The portion of the franchise fee, if any, that is not attributable to a distinct performance obligation are amortized over the life of the related franchise agreements. The company adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting with January 1, 2020. Upon adoption, the Company recorded deferred revenue, and a cumulative effect to decrease accumulated retained earnings by $58
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the company's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. This means Aw adheres to GAAP standards.
Aw also recognizes revenue in accordance with Accounting Standards Board (FASB) and Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied. Any portion of the franchise fee not attributable to a distinct performance obligation is amortized over the life of the related franchise agreements.
Aw adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020. Upon adoption, the company recorded deferred revenue, and a cumulative effect to decrease accumulated retained earnings by $58,500 on the Balance Sheet for the unamortized portion of fees received on behalf of the then operating franchise agreements. This indicates a significant adjustment related to how Aw recognizes revenue from its franchise agreements, which could impact how a franchisee views the company's financial performance and stability.