What accounting standards are used in the Belocal financial statements?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounting Policies
Basis of Accounting
The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Under this method, revenue is recognized when earned and expenses are recognized as incurred.
Use of Estimates
The preparation of the financial statements and accompanying notes in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates, among others, are used for the revenue recognition and income taxes. Actual results could differ from those estimates.
Fiscal Year
Our fiscal year begins on July 1st and ends on June 30th.
Comparative Financial Statements
Certain prior period amounts have been reclassified to conform to current year presentation.
Cash and Cash Equivalents
For purposes of reporting cash flows, all highly liquid investments with a maturity of three months or less are considered cash equivalents.
Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company's financial instruments consist primarily of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses. The carrying values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses are considered to be representative of their respective fair values due to the short-term nature of these instruments.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 70–71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). This means that Belocal recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands. This is a standard accounting practice ensuring financial statements reflect the true economic activity of the company during a reporting period.
Furthermore, the FDD mentions that the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates are used for revenue recognition and income taxes, and actual results could differ. This is a common aspect of financial reporting, as some figures require forecasting and judgment. Franchisees should be aware that these estimates can impact the financial picture presented.
The FDD also states that Belocal has adopted ASU 2021-02, which simplifies the application of ASC 606 regarding performance obligations. This allows Belocal, as a non-public entity, to account for pre-opening services as distinct from the franchise license. Additionally, the company is currently evaluating the impact of adopting ASU No. 2023-09, which requires more detailed income tax disclosures. These pronouncements from the FASB (Financial Accounting Standards Board) aim to provide investors with more detailed information for making capital allocation decisions.
Finally, the independent auditor's report states that the financial statements of N2 Franchising, Inc. (Belocal) present fairly, in all material respects, the financial position, results of operations, changes in stockholders' equity, and cash flows in accordance with accounting principles generally accepted in the United States of America. This opinion provides assurance that the financial statements are reliable and conform to established accounting standards.