What does Fitstop management need to do when preparing financial statements in conformity with accounting principles?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
t risk primarily consist of cash and cash equivalents. The balances in the Company's cash accounts as of December 31, 2023 and 2022 did not exceed the Federal Deposit Insurance Company's (FDIC) insurance limit of $ 250,000. The Company maintains its cash and cash equivalents with accredited financial institutions.
Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.
Cash-Cash consists of unrestricted cash on deposit at financial institutions.
Taxes on Income -The Company is a limited liability company for tax purposes. Income for the Company passes directly through to its members and is reported on the members individual income tax returns.
Revenue Recognition — In May 2014, the FASB issued a new accounting standard ASU No. 2014- 09, "Revenue from Contracts with Customers (Topic 606)", that attempts to establish a uniform basis for recording revenue to virtually all industries' financial statements.
The new guidance changed how the Company records initial franchise fees from franchisees, area developer fees and brand development fees. Under Legacy GAAP, franchise fees, which are nonrefundable, were recognized as income when substantially all services to be performed by the Company and conditions relating to the sale of the franchise were performed or satisfied, which generally occurred when the franchisee commenced operations.
FITSTOP USA, INC. NOTES TO FINANCIAL STATEMENTS (continued)
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3. REVENUE RECOGNITION
The Company records revenue in accordance Accounting Standards Board ("FASB") and Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, when preparing financial statements in conformity with accounting principles generally accepted in the United States of America, Fitstop's management must make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The document notes that actual results could differ from these estimates.
In preparing financial statements, Fitstop's management is responsible for the fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America. They are also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Furthermore, Fitstop's management is required to evaluate whether there are conditions or events that raise substantial doubt about Fitstop's ability to continue as a going concern within one year after the date that the financial statements are available to be issued. This evaluation is a critical component of ensuring the financial statements provide an accurate representation of the company's financial health and stability.