What accounting standard does Cinnaholic use to prepare its financial statements?
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.
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 on an accrual basis, following accounting principles generally accepted in the United States of America. This means that Cinnaholic recognizes revenues when earned and expenses when a liability is incurred, regardless of when the cash is received or paid out. This is a standard accounting practice ensuring that financial statements accurately reflect the company's financial performance and position.
For a prospective Cinnaholic franchisee, understanding this accounting basis is crucial. It dictates how the franchisor, Cinnaholic Franchising LLC, records and reports its financial transactions. The accrual method provides a more accurate picture of the company's profitability and financial health compared to the cash method, which only recognizes transactions when cash changes hands. This is particularly important when evaluating the franchisor's financial stability and performance.
Furthermore, the FDD emphasizes that the preparation of these financial statements requires management to make estimates and assumptions. These estimates can affect the reported amounts of assets, liabilities, revenues, and expenses. While this is a standard part of financial reporting, prospective franchisees should be aware that actual results could vary from these estimates. Understanding the accounting policies helps franchisees interpret the financial statements presented in the FDD and assess the financial risks and opportunities associated with investing in a Cinnaholic franchise.