What currencies are Exit's revenues and expenses exposed to?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
When the functional currency differs form the reporting currency (U.S. dollar), all revenue, cost and expense accounts are translated at an average of exchange rates in effect during the year and assets and liabilities recorded in foreign currencies are translated at the exchange rate as of the balance sheet date. The resulting translation adjustments are recorded as a separate component of stockholders' equity, identified as accumulated other comprehensive loss.
Other Comprehensive Income (Loss):
U.S. GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, however, such as foreign currency translation adjustments, are reported as a direct adjustment to the equity section of the balance sheet. Such items, along with net income, are considered components of comprehensive income.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, because the functional currency can differ from the reporting currency (U.S. dollar), all revenue, cost, and expense accounts are translated at an average of exchange rates in effect during the year. Assets and liabilities recorded in foreign currencies are translated at the exchange rate as of the balance sheet date. The resulting translation adjustments are recorded as a separate component of stockholders' equity, identified as accumulated other comprehensive loss.
This means that Exit's financial statements are affected by fluctuations in exchange rates between the U.S. dollar and any foreign currencies in which Exit conducts business. For a prospective franchisee, this is important because it highlights that Exit's financial performance, as reported in U.S. dollars, can be influenced by currency exchange rates, especially if the franchisee is operating in a country with a currency other than the U.S. dollar.
U.S. GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, however, such as foreign currency translation adjustments, are reported as a direct adjustment to the equity section of the balance sheet. Such items, along with net income, are considered components of comprehensive income. This indicates that Exit must adhere to specific accounting standards when dealing with foreign currency transactions, which can impact how the company's financial health is perceived.