Under what accounting method was the acquisition of the Christian Brothers Automotive franchise accounted for?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
olidation**
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).
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.
Limited Liability Entities
VIEs of the Company are structured as limited liability companies or partnerships throughout the United States of America. Members of the limited liability companies are not liable for any debt, obligations or other liability of the Company unless they have expressly guaranteed certain debt. All limited liability entities have one class of units or equal limited partnership rights. Class A units have preferential rights for liquidating the entity or capital gain proceeds.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, the consolidated financial statements are prepared using the accrual basis of accounting, following accounting principles generally accepted in the United States of America (GAAP). This means that revenues and expenses are recognized when they are earned or incurred, regardless of when cash changes hands.
Specifically, the FDD states that Christian Brothers Automotive consolidates all wholly owned subsidiaries and variable interest entities (VIEs) for which it is the primary beneficiary. This consolidation process eliminates all significant intercompany transactions and balances. In September 2023, Christian Brothers Automotive acquired 100% ownership of WWK Warranty and Administration LLC (WWK). In August 2024, the company acquired a 44% ownership stake in Foedus Sui, LLC (Foedus) and consolidates Foedus in its consolidated financial statements.
For a prospective franchisee, understanding these accounting policies is crucial for interpreting the financial statements provided in the FDD and for managing their own franchise's finances. The accrual method provides a more accurate picture of a business's financial performance over time compared to the cash method, which only recognizes transactions when cash is received or paid. Franchisees should consult with a financial professional to fully understand the implications of these accounting principles for their specific business.