How did Fast Fix Jewelry And Watch Repairs elect to account for the use of the ERC?
Fast_Fix_Jewelry_And_Watch_Repairs Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has accounted for the ERC income as a government grant which analogizes with International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. IAS 20 indicates that income is recognized when it is considered that there is reasonable assurance the grant will be received and all necessary qualifying conditions, as stated in the CARES act, are met. Under IAS 20, income is recognized on a systematic basis over the period in which the entity recognizes as expenses the related costs for which the grant is intended to compensate. The Company elected to account for the use of the ERC on a gross basis and the income is included in other income (expenses) within the consolidated statements of operations. The activity related to ERC income is included in the operating activities of the consolidated statements of cash flow.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 37)
What This Means (2025 FDD)
According to Fast Fix Jewelry And Watch Repairs' 2025 Franchise Disclosure Document, the company has chosen to account for the Employee Retention Credit (ERC) income as a government grant, drawing an analogy to International Accounting Standards (IAS) 20, which deals with accounting for government grants and disclosure of government assistance. IAS 20 dictates that income is recognized when there is reasonable assurance that the grant will be received and all necessary qualifying conditions, as outlined in the CARES Act, are met.
Under IAS 20, Fast Fix Jewelry And Watch Repairs recognizes income systematically over the period in which it recognizes the related costs that the grant is intended to compensate. Specifically, Fast Fix Jewelry And Watch Repairs elected to account for the use of the ERC on a gross basis. This means that the income is included in other income (expenses) within the consolidated statements of operations, rather than being netted against related expenses.
For a prospective Fast Fix Jewelry And Watch Repairs franchisee, this accounting treatment is relevant for understanding how the company manages and reports government assistance programs like the ERC. The activity related to ERC income is included in the operating activities of the consolidated statements of cash flow, providing transparency into how these funds impact the company's financial statements. This approach ensures that the financial statements accurately reflect the impact of the ERC on the company's financial performance and cash flow.