What assumptions does the management of Gokhale Method make relating to the reporting of assets and liabilities?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
Use of Estimates
Management of the Company has made certain estimates and assumptions relating to the reporting of assets, liabilities, results of operations, and the disclosure of contingent assets and liabilities to prepare these financial statements in accordance with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all highly liquid investments and investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on hand.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable is primarily comprised of net royalty receivables from franchises, franchise fees, or class fees collected by GME.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, the company's management makes certain assumptions and estimates regarding the reporting of assets, liabilities, results of operations, and the disclosure of contingent assets and liabilities when preparing its financial statements. These assumptions are made to adhere to accounting principles generally accepted in the United States of America. The document also states that the actual results could potentially differ from these initial estimates.
Specifically, Gokhale Method utilizes the allowance method for doubtful accounts, which involves management reviewing past due accounts to determine the allowance. For the years ending December 31, 2021 and December 31, 2022, management believed that all receivables were collectible after year end. This indicates an assumption that the outstanding payments from franchisees, teachers, or class fees would ultimately be received.
Furthermore, in preparing financial statements, Gokhale Method's management must evaluate conditions or events that could raise substantial doubt about the company's ability to continue as a going concern within one year after the financial statements are issued. This involves assessing the company's financial stability and future prospects to ensure the accuracy and reliability of the financial reporting. A prospective franchisee should be aware of these assumptions and estimates, as they can impact the financial health and stability of the franchise system.