For the Gokhale Method, what is the purpose of presenting the summary of significant accounting policies?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
Basis of Presentation
This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in United States of America ("U.S. GAAP") and have been consistently applied in the preparation of the financial statements.
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. Accounts receivable is recorded at the net realizable value expected to be received through the aforementioned revenue streams.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 Gokhale Method Franchise Disclosure Document, the summary of significant accounting policies is presented to aid in the understanding of the company's financial statements. The financial statements and accompanying notes are the responsibility and representation of Gokhale Method's management, who are accountable for their integrity and objectivity. These policies adhere to accounting principles generally accepted in the United States of America (U.S. GAAP) and are consistently applied when preparing the financial statements.
This summary offers transparency into how Gokhale Method handles its financial reporting. It allows potential franchisees and other stakeholders to better interpret the financial data presented. Understanding these policies is crucial for assessing the financial health and stability of the company.
Furthermore, the summary addresses the use of estimates in financial reporting. It acknowledges that management makes certain estimates and assumptions regarding assets, liabilities, results of operations, and disclosures of contingent items. The document clarifies that actual results could differ from these estimates. It also defines cash equivalents as highly liquid investments with original maturities of three months or less and explains how the company accounts for accounts receivable and doubtful accounts, noting that management believed all receivables were collectible as of December 31, 2022.