What factors does Coffee News management estimate and assume when preparing financial statements?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
lerated methods over the asset's estimated useful lives. The Company capitalizes equipment with an estimated useful life greater than one year.
Notes to Financial Statements
December 31, 2024, 2023 and 2022
1. Summary of Significant Accounting Policies
Revenue Recognition
Revenue from the collection of royalty payments, training fees, and product promotional sales are recognized monthly since they are earned at a point in time. Revenues from the sale of franchises are recognized over the term of the initial franchise agreement, generally four years. The Company provides franchisees with the weekly content and other support in accordance with the franchise agreement.
Advertising Costs
Advertising costs of $41,044, $29,523, and $38,230 for years ended 2024, 2023 and 2022 are charged to expense as they are incurred.
Investments
Investments are stated at fair value based on the last reported sales price on the last business day of the fiscal year.
Income Taxes
Coffee News USA, Inc. is an S corporation under provisions of the United States Internal Revenue Code. As such, its income for federal income tax purposes is taxed at the shareholder level, and no income taxes are provided for the Company. Federal and state returns for 2024, 2023, and 2022 are subject to examination by the IRS, generally for three years after they were filed.
2. Revenue and Deferred Franchise Revenues
Disaggregation of revenue from contracts with customers
The following table disaggregates the Company's revenue based on the timing of satisfaction of performance obligations for the years ended December 31:
| Alexx Saurbeck | 211 Riley Drive | 2 |
|---|---|---|
| Fort Wayne, IN 46825 574-307-4251 | ||
| Cheryl Walsh | 505 S. 30th St. |
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to Coffee News's 2025 Franchise Disclosure Document, several factors influence the preparation of its financial statements. A primary consideration for Coffee News USA, Inc. is the recognition of revenue. Royalty payments, training fees, and sales of promotional products are recognized monthly as they are earned. Revenue from franchise sales is recognized over the initial franchise agreement term, typically four years, as Coffee News provides weekly content and support to franchisees.
Another significant factor is advertising costs, which are expensed as incurred. For the years 2024, 2023, and 2022, these costs amounted to $41,044, $29,523, and $38,230, respectively. Investments are stated at fair value, based on the last reported sales price on the last business day of the fiscal year. As an S corporation, Coffee News USA, Inc.'s income is taxed at the shareholder level, so no income taxes are provided for at the company level. The financial statements also reflect the adoption of FASB Accounting Standards Update (ASU) 2016-13 regarding credit losses on financial instruments, though this adoption did not materially impact the financial statements.
Additionally, Coffee News USA, Inc. faces risks and uncertainties that could affect future revenue growth. The company's future success depends on maintaining and expanding franchise sales, which is influenced by the effectiveness of the franchise development staff and overall economic conditions worldwide. Management also considers the balances held in financial institutions, ensuring they are within federally insured limits (up to $250,000) to mitigate risk. These elements collectively shape the estimates and assumptions used in preparing Coffee News's financial statements, providing a comprehensive view of the company's financial position and performance.