In the context of Care Plus Medical Ucc's financial statements, what accounting principles are followed?
Care_Plus_Medical_Ucc Franchise · 2024 FDDAnswer from 2024 FDD Document
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). As a result, the Company records revenue when earned and expenses when incurred. The Company has adopted the calendar year as its basis of reporting.
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities and other items, as well as the reported revenues and expenses. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and any cash equivalents include all cash balances, and highly liquid investments with maturities of three months or less when purchased.
Revenue Recognition
Revenues are primarily derived from franchise fees (one-time and recurring monthly fees). In accordance with Accounting Standards Codification (ASC) Topic 606, Revenue will be recognized when persuasive evidence of an arrangement exists, delivery has occurred, or services have been rendered, the seller's price to the buyer is fixed or determinable, and collectability is reasonable assured. The determination of whether fees and fixed or determinable and collection is reasonable assured involves the use of assumptions. Arrangement terms and customer information are evaluated to ensure that these criteria are met prior to recognition of revenue.
Specifically for franchisors, The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' in 2022 which provides a new practical expedient that permits private company franchisors to account for preopening services provided to a franchisee as distinct from the franchise license if the services are consistent with those included in a predefined list within the guidance. The Company has elected to adopt this new standard.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 41)
What This Means (2024 FDD)
According to Care Plus Medical Ucc's 2024 Franchise Disclosure Document, the company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). This means Care Plus Medical Ucc records revenue when earned and expenses when incurred, adhering to standard accounting practices. The company has adopted the calendar year as its basis of reporting.
Furthermore, the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent items, and reported revenues and expenses. Actual results could differ from these estimates. Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less when purchased.
Revenues are primarily derived from franchise fees, both one-time and recurring monthly fees. Care Plus Medical Ucc recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, meaning revenue is recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. The determination of whether these criteria are met involves the use of assumptions and evaluation of arrangement terms and customer information.
Specifically for franchisors, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' in 2022. This update provides a practical way for private company franchisors to account for preopening services as distinct from the franchise license if the services align with a predefined list within the guidance, which Care Plus Medical Ucc has elected to adopt.