What are some of the significant estimates that Deer Solution management makes when preparing the company's financial statements?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Deer Solution Franchising, LLC's ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Deer Solution Franchising, LLC's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Deer Solution Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 55–246)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, management must evaluate conditions or events that could raise substantial doubt about the company's ability to continue as a going concern within one year after the financial statements are issued. This involves assessing the company's financial stability and ability to meet its obligations in the near term. This evaluation is a critical part of preparing the financial statements and ensuring their accuracy and reliability.
Additionally, Deer Solution's accounting policies require accounts receivable to be carried at their estimated collectible amounts, net of any estimated allowances for doubtful accounts. The company provides an allowance for doubtful collections based on a review of outstanding receivables, historical collection information, existing economic conditions, and other relevant factors. For the years 2024 and 2023, management determined that no allowance for doubtful accounts was necessary. This indicates that Deer Solution believed it would collect all of its outstanding receivables during those years.
Furthermore, the auditor is responsible for evaluating the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements. This includes assessing the appropriateness of accounting policies used and whether the estimates are supported by evidence. The auditor must also conclude whether there are conditions or events that raise substantial doubt about Deer Solution's ability to continue as a going concern for a reasonable period of time. These estimates and evaluations are essential for providing a fair and accurate representation of Deer Solution's financial position and performance.