What accounting principles must Golden Krust Caribbean Restaurant's consolidated financial statements adhere to?

According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the company's consolidated financial statements are prepared on the accrual basis of accounting. This means that revenues and expenses are recognized when they are earned or incurred, regardless of when cash changes hands.

Furthermore, these financial statements must adhere to accounting principles generally accepted in the United States of America (GAAP). GAAP provides a common set of rules and standards for financial reporting, ensuring consistency and comparability across different companies' financial statements. This is a standard practice for franchise systems in the United States.

In addition, the Golden Krust Caribbean Restaurant FDD states that the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent items. This is a normal part of financial reporting, as some items require judgment and may not have precise values. However, it also means that actual results could differ from those estimates, introducing a degree of uncertainty into the financial statements. Franchisees should be aware of this when reviewing the financial statements and consider the potential impact of these estimates.