For Benihana, how are assets and liabilities of foreign operations translated into U.S. dollars?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
wing four reportable operating segments: STK, Kona Grill, ONE Hospitality and Corporate. Refer to Note 13 for additional details and certain financial information regarding the Company's operating segments relating to the years ended December 31, 2021 and 2020. Prior year amounts have been revised to conform to the current year segment presentation.
Foreign Currency Translation
Assets and liabilities of foreign operations are translated into U.S. dollars at the balance sheet date. Revenues and expenses are translated at average monthly exchange rates. Gains or losses resulting from the translation of foreign subsidiaries represent other comprehensive income (loss) and are accumulated as a separate component of stockholders' equity. Currency translation gains or losses are recorded in accumulated other comprehensive loss within stockholders' equity and amounted to a gain of approximately $1,000 and $5,000 during 2021 and 2020, respectively.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company translates the assets and liabilities of its foreign operations into U.S. dollars using the exchange rate on the balance sheet date. Revenues and expenses are translated at average monthly exchange rates. Any gains or losses that arise from translating the financial statements of Benihana's foreign subsidiaries are reported as other comprehensive income or loss and are accumulated as a separate component of stockholders' equity. These currency translation gains or losses are then recorded in accumulated other comprehensive loss within stockholders' equity.
For example, in 2022, Benihana experienced a currency translation loss of approximately $0.2 million, while in 2021, it had a gain of approximately $1,000. These amounts reflect the impact of currency fluctuations on the company's foreign operations and how those fluctuations are accounted for in its financial statements. These adjustments relate to wholly owned subsidiaries of Benihana.
This accounting treatment is important for prospective franchisees to understand because it can affect Benihana's overall financial performance and reported equity. While franchisees are unlikely to be directly involved in these currency translations, understanding the impact of foreign exchange rates on the franchisor's financial statements can provide a more complete picture of the company's financial health and stability. Franchisees should consider these factors when evaluating the financial viability of investing in a Benihana franchise.