Regarding the consolidated financial statements of Epcon Communities, what happens to significant intercompany balances and transactions?

According to Epcon Communities' 2025 Franchise Disclosure Document, the consolidated financial statements include the financial statements of Epcon Communities Franchising, LLC (Franchising) and Epcon Communities Marketing Program, Inc. (Marketing). To provide a clear financial picture, any significant balances or transactions between these two entities are eliminated during the consolidation process. This means that revenues, expenses, and debts that Franchising and Marketing have with each other are removed when their financial statements are combined.

This consolidation approach is standard accounting practice. By eliminating intercompany transactions, the consolidated financial statements offer a more accurate view of Epcon Communities' financial performance and position to outside parties, such as potential investors or franchisees. Without this elimination, the financial statements could be misleading, as they might overstate revenues or expenses due to internal transactions.

For a prospective Epcon Communities franchisee, this means that the financial statements presented in the FDD provide a transparent and uncluttered view of the company's overall financial health. The elimination of intercompany transactions ensures that franchisees are making informed decisions based on the true performance of the consolidated entity, rather than being misled by internal financial activities. This practice enhances the reliability and credibility of the financial information provided by Epcon Communities.