How does Benihana define net realizable value for its inventories?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
nths or less when purchased. The Company's cash and cash equivalents consist of cash in banks and at the restaurants as of December 31, 2023 and 2022.
Accounts Receivable
The Company's receivables arise from credit cards, management agreements, trade customers and other reimbursable amounts due from hotel operators where the Company operates a food and beverage service. Accounts receivable from credit card processors and th
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company values its inventories, which include food, liquor, and other beverages, at the lower of cost or net realizable value. The cost is determined using the first-in, first-out (FIFO) method.
Net realizable value is specifically defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs to sell. This means Benihana estimates what it can sell its inventory for under normal business conditions and then subtracts any costs it anticipates incurring to make the sale.
For a prospective Benihana franchisee, this accounting practice is important because it affects how the value of inventory is reported on the financial statements. Understanding how Benihana values its inventory can provide insights into the company's financial health and inventory management practices. For example, as of December 31, 2023, food inventories were valued at $4.0 million and beverage inventories at $2.2 million.