What accounting principles does Crave Cookies use in preparing its financial statements?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
s the right to operate a physical storefront location using the Crave Cookies name and marks.
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk - Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 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 explicitly stated in the notes to the financial statements, which are audited by independent accountants. This indicates that Crave Cookies aims to provide a fair and transparent view of its financial position to potential franchisees and other stakeholders.
Specifically, the use of these principles requires Crave Cookies' management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent items. This means that some figures in the financial statements are based on management's best judgment, and actual results could differ. For example, the company provides an allowance for credit losses based on a review of outstanding receivables, historical collection information, and existing economic conditions.
Furthermore, Crave Cookies uses the first-in, first-out (FIFO) method to determine the costs of its cookie box inventories. This method assumes that the first units purchased are the first ones sold. This is a common inventory valuation method and can impact the reported cost of goods sold and inventory values. The financial statements also include specific policies for cash and cash equivalents, accounts receivable, notes receivable from related parties, prepaid expenses, and property and equipment, providing a comprehensive overview of the company's accounting practices.