According to Cinnaholic's FDD, what accounting standard does the company use?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
ANY
Cinnaholic Franchising LLC ("the Company") is a Georgia limited liability company that was formed in January 2014 to offer franchises for the operation of a bakery which offers custom gourmet cinnamon rolls and other food products and beverages.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting-The accompanying financial statements have been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or disbursement of funds.
Franchise Arrangements-The Company's franchise arrangements generally include a license which provides for payments of initial fees as well as continuing royalties to the Company based upon a percentage of sales. Under this arrangement, franchisees are granted the right to operate a Cinnaholic bakery for a specified number of years.
Concentration of Credit Risk-Financial instruments primarily consist of cash and cash equivalents.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 61)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, the company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. This is commonly referred to as GAAP.
Under these principles, Cinnaholic uses the accrual method of accounting, where revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of when the cash changes hands. This means that Cinnaholic's financial statements aim to provide a clear and accurate picture of the company's financial performance by matching revenues with the expenses incurred to generate those revenues in the appropriate accounting period.
Additionally, Cinnaholic records revenue in accordance with the Financial Accounting Standards Board (FASB) and Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The company recognizes the transaction price attributable to performance obligations as the performance obligations are satisfied. Cinnaholic adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020.