What is the expected impact of the Employee Retention Credit on Cinch I.T.'s financial statements?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
er 31, 2019 and 2020 were discovered during the current year. Accordingly, an adjustment of $21,198 was made to increase receivables – trade for the year ended December 31, 2020.
In 2021 the Company applied for the Employee Retention Credit ("ERC") established by the CARES Act in the amount of $38,487. The tax credit applies to payroll taxes paid during the year ended December 31, 2020. The credit is expected to be received in the year ended December 31, 2022 and is included as a long-term receivable on the balance sheet and as extraordinary income in the statements of operations and member's deficit due to the unprecedented nature of COVID-19.
The net ef
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, the company applied for the Employee Retention Credit (ERC) established by the CARES Act in 2021. The amount of the credit was $38,487, and it applied to payroll taxes paid during the year ended December 31, 2020. The FDD states that Cinch I.T. expected to receive the credit in the year ended December 31, 2022.
The document indicates that the credit is included as a long-term receivable on the balance sheet. Additionally, it is categorized as extraordinary income in the statements of operations and member's deficit due to the unprecedented nature of COVID-19. The net effect of the restatement on net loss and member's deficit was a decrease in net loss of $32,487 and an increase in member's deficit of $53,685 for the year ended December 31, 2020.
For a prospective Cinch I.T. franchisee, this information provides insight into how the company handled financial relief measures during the COVID-19 pandemic. It demonstrates that Cinch I.T. took advantage of available credits to offset payroll tax expenses. The inclusion of the ERC as a long-term receivable and extraordinary income suggests that the company accounted for it separately due to its unique nature. The restatement's impact on net loss and member's deficit further illustrates the financial adjustments made to reflect the credit's influence on the company's financial position.