On what basis of accounting does Coffee News prepare its financial statements?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's policy is to prepare its financial statements on the income tax basis of accounting under which certain revenues and expenses are recognized in the determination of income in different reporting periods than they would be if the financial statements were prepared in accordance with generally accepted accounting principles. The tax basis differs primarily because the company has not provided an accrual for income taxes and has not adopted ASC 606 Revenue from Contracts with Customers. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations under generally accepted accounting principles.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, the financial statements for 2703203 Manitoba, Ltd., which owns the worldwide trademarks and franchise rights for Coffee News, are prepared on the income tax basis of accounting. This means that certain revenues and expenses are recognized in different reporting periods compared to generally accepted accounting principles (GAAP).
The FDD specifies that the tax basis differs primarily because the company has not provided an accrual for income taxes and has not adopted ASC 606 Revenue from Contracts with Customers. As a result, the financial statements are not intended to present the financial position and results of operations in accordance with GAAP.
For a prospective Coffee News franchisee, this means the financial statements of the parent company may not provide a complete picture of the company's financial health compared to standard accounting practices. It is important to understand the implications of using the income tax basis of accounting when evaluating the financial performance of 2703203 Manitoba, Ltd.