Has Bombs Away determined the effects of departures from accounting principles on its financial position?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Property and Equipment is stated at cost. Accounting principles generally accepted in the United States of America require that property and equipment be depreciated using the straight-line method. Depreciation in these financial statements reflects accelerated depreciation methods used for the tax return. The effects of these departures from accounting principles generally accepted in the United States of America on financial position, results of operations, and cash flows have not been determined. Expenditures for normal repairs and maintenance are charged to operations as incurred.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. However, Bombs Away uses accelerated depreciation methods for tax returns, which is a departure from standard accounting principles requiring straight-line depreciation.
Specifically, the FDD states that the effects of these departures from generally accepted accounting principles on Bombs Away's financial position, results of operations, and cash flows have not been determined. This means that the financial statements may not fully reflect the impact of using accelerated depreciation for tax purposes, potentially affecting the accuracy and comparability of the financial information presented.
For a prospective Bombs Away franchisee, this disclosure indicates a potential area of uncertainty in the financial reporting. While the independent accountant has issued an opinion that the financial statements are fairly presented, the lack of a determined impact from the depreciation method could make it more difficult to fully assess the company's financial performance and position. It would be prudent for a potential franchisee to discuss this further with Bombs Away and their own financial advisors to understand any potential implications.