To whom is the income generated from the activities of the VIEs payable for Christian Brothers Automotive, and how is it accounted for?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
In accordance with GAAP, CBAC consolidates all wholly owned subsidiaries and variable interest entities (VIEs), for which CBAC has determined to be the primary beneficiary (collectively, the Company). All significant intercompany transactions and balances have been eliminated upon consolidation.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Christian Brothers Automotive consolidates all variable interest entities (VIEs) for which it is the primary beneficiary. This means that the financial results of these VIEs are included in Christian Brothers Automotive's overall financial statements. All significant intercompany transactions and balances between Christian Brothers Automotive and these VIEs are eliminated during the consolidation process.
In simpler terms, if Christian Brothers Automotive is deemed to be the primary beneficiary of a VIE, the income generated by that VIE is effectively considered as income of Christian Brothers Automotive. This income is then reported on Christian Brothers Automotive's consolidated financial statements, providing a comprehensive view of the company's financial performance.
This accounting practice is in accordance with generally accepted accounting principles (GAAP) in the United States. By consolidating VIEs, Christian Brothers Automotive aims to provide a transparent and accurate representation of its financial position and results of operations to its stakeholders, including potential franchisees.