What accounting principles must Fitstop's financial statements adhere to?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
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1. THE COMPANY
FITSTOP USA, INC. is a Georgia limited liability company that was a formed in April 2021. The Company grants franchises to operate restaurants specializing in an all-you can-get pizza buffet and beverage items.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting-The accompanying financial statements have been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or disbursement of funds.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, the company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. This is explicitly stated within the notes to the financial statements, ensuring that Fitstop's financials adhere to a standardized and widely recognized framework. This framework dictates how revenues are recognized, expenses are recorded, and assets and liabilities are presented. The accrual method of accounting is used, meaning revenues are recognized when earned and expenses when a liability is incurred, regardless of when the cash changes hands.
The FDD also includes an independent auditor's report, which expresses an opinion on whether Fitstop's financial statements present fairly the company's financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States of America. This audit is conducted in accordance with auditing standards generally accepted in the United States of America (GAAS), providing an additional layer of assurance regarding the reliability of the financial statements. The auditor's report indicates that they believe the audit evidence obtained is sufficient and appropriate to provide a basis for their audit opinion.
Furthermore, the notes to the financial statements also address specific accounting policies such as the use of estimates, cash handling, and revenue recognition. Management is responsible for preparing the financial statements and ensuring they are free from material misstatement, whether due to fraud or error. They must also evaluate Fitstop's ability to continue as a going concern. The auditor is responsible for expressing an opinion on these financial statements, exercising professional judgment, and maintaining professional skepticism throughout the audit. For a potential franchisee, this adherence to GAAP and the external audit provide a level of confidence in the financial information presented by Fitstop.