How does Burneys Sweets More recognize revenue and operating expenses in its financial statements?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
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The financial statements of the Company have been prepared in accordance accounting principles generally accepted in the United States. Which are prepared on an accrual basis of accounting, which recognized all revenue as income when earned and operating expenses as deductions from income when incurred. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader.
Use of Estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.
Cash and Cash Equivalents
For the purpose of these financial statements, cash and cash equivalents includes cash in checking, on hand and in certificates of deposit.
Allowance for Doubtful Accounts
Accounts receivable are recorded at the amount the Company expects to collect on balances outstanding at year end. An allowance for doubtful accounts is recorded based on a combination of write-off history or any known troubled accounts. Accounts are monitored closely and delinquencies are determined based on payment history. Accounts are written off when they are determined to be uncollectible. Accounts receivable has not been reduced by an allowance at this time, all are deemed collectible by management.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the following useful lives:
Furniture and Equipment 5-10 years Vehicles 5 years
Repair and maintenance costs are expenses as incurred. When property and equipment are retired or otherwise disposed, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective year. Depreciation expense was $30,936, and $25,096 for the year ended December 31, 2024 and 2023, respectively.
Revenue and Cost Recognition
The Company's revenues consist of fees from franchised restaurants operated by conventional franchisees. Revenues from conventional franchised restaurants include royalties based on a percent of sales in additional to the recognized initial franchise fee amount. Financial Accounting Services Board issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new guidance that went into effect January 1, 2019, establishes the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of
DMG BURNEY, INC
revenue from contracts with customers.
Source: Item 23 — RECEIPT (FDD pages 50–199)
What This Means (2025 FDD)
According to Burneys Sweets More's 2025 Franchise Disclosure Document, the company prepares its financial statements using generally accepted accounting principles in the United States, following the accrual basis of accounting. This means Burneys Sweets More recognizes revenue as income when it is earned and recognizes operating expenses as deductions from income when they are incurred. This approach ensures that revenues and expenses are matched to the period in which they occur, providing a more accurate picture of the company's financial performance.
For initial franchise fees, Burneys Sweets More changed its accounting policy beginning in January 2019 due to the Financial Accounting Services Board's Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Before 2019, initial franchise fees were recognized when received, upon a new restaurant opening, or at the start of a new franchise term. However, after adopting Topic 606, Burneys Sweets More recognizes a portion of the initial franchise fee in the current period as the company satisfies its initial performance obligation, and the remaining amount is recognized over the franchise term, which is generally 10 years.
Royalties from franchised restaurants, which are based on a percentage of sales, and vendor rebates are recognized at the time the underlying sales occur or when received from the vendor, respectively. Any portion of the initial franchise fee not recognized in the current year is reported as deferred revenue on the balance sheet and is recognized in equal annual amounts over the remaining years of the franchise agreement. This deferred revenue recognition impacts how Burneys Sweets More reports its financial performance, particularly in the early years of a franchise agreement.