How is the property and equipment of Chocolate Bash stated in the financial statements?
Chocolate_Bash 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.
The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is present when the sum of the undiscounted estimated future cash flows expected to result from use of the assets is less than carrying value. If impairment is present, the carrying value of the impaired asset is reduced to its fair value. As of December 31, 2023, December 31, 2022, & December 31, 2021, no impairment loss has been recognized for long-lived assets.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the company's property and equipment are recorded at cost. While accounting principles generally accepted in the United States of America require the use of the straight-line depreciation method, Chocolate Bash uses accelerated depreciation methods for tax purposes.
This deviation from standard accounting principles means that the depreciation reflected in Chocolate Bash's financial statements is based on methods used for their tax return, which are accelerated. The FDD states that 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.
Chocolate Bash reviews its long-lived assets for impairment when events suggest that the carrying value may not be recoverable. If the expected future cash flows from the asset's use are less than its carrying value, the asset's value is reduced to its fair value. As of December 31, 2023, December 31, 2022, and December 31, 2021, no impairment loss has been recognized for long-lived assets.