On what basis of accounting does Burros Fries prepare its financial statements?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
variety of Mexican foods and drinks.
Basis of Presentation
The Company prepares its financial statements following the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (GAAP). Under this method, revenues are recorded in the period in which they are earned rather than when received and expenses are recorded in the period incurred rather than when paid. The financial statements have been prepared using historical cost and fair value bases as discussed in the applicable accounting policies.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, the company prepares its financial statements using the accrual basis of accounting, following generally accepted accounting principles (GAAP) in the United States. This accounting method ensures that revenues are recorded when earned, not necessarily when the cash is received, and expenses are recognized when incurred, regardless of when payment is made. The financial statements are prepared using historical cost and fair value bases as detailed in the applicable accounting policies.
For a prospective Burros Fries franchisee, this means that the financial data presented in the FDD is based on the accrual method, which provides a more accurate picture of the company's financial performance over time compared to the cash basis of accounting. Understanding this basis is crucial for interpreting the financial statements and assessing the financial health of Burros Fries. Franchisees can rely on these statements to make informed decisions about their investment and operational strategies.
It is important to note that the preparation of financial statements under GAAP requires management to make estimates and assumptions that could affect the reported amounts of assets, liabilities, revenues, and expenses. Therefore, actual results may differ from these estimates. Franchisees should be aware of this inherent uncertainty and consider it when evaluating the financial information provided. Consulting with a financial advisor to fully understand the implications of the accrual basis of accounting and the estimates involved is advisable.