What does Golden Krust Caribbean Restaurant consider to be cash equivalents?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
tements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Restricted Cash
The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. Cash and restricted cash on the balance sheets includes $258,713 and $1,153,034 of restricted cash related to the Company's advertising fund, as of December 31, 2023 and 2022, respectively.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Restricted Cash (Continued)
The Company maintains an advertising fund, which is accounted for separately, as described in the Company's Franchise Disclosure Document (FDD). The Company's franchisee's make monthly contributions to the advertising fund based on a percentage of their respective sales. These funds are segregated to pay for franchise related advertising and cannot be used to defray general operating expenses of the Company, except as otherwise described in the FDD.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Golden Krust Caribbean Restaurant considers cash equivalents to be highly liquid debt instruments that are purchased with an initial maturity of three months or less.
For prospective franchisees, understanding how Golden Krust Caribbean Restaurant defines cash equivalents is important for interpreting the company's financial statements. This definition affects how the company reports its cash position and overall financial health. Cash and restricted cash on the balance sheets includes $258,713 and $1,153,034 of restricted cash related to the Company's advertising fund, as of December 31, 2023 and 2022, respectively.
This definition is a standard accounting practice. Knowing that Golden Krust Caribbean Restaurant follows this standard allows franchisees and investors to compare the company's financial statements with those of other companies using similar accounting principles. The FDD also mentions that the company maintains an advertising fund, which is funded by franchisee contributions based on a percentage of their sales. These funds are kept separate and used for franchise-related advertising, and cannot be used for the company's general operating expenses.