What does Hyper Kidz's management estimate and assume when preparing financial statements?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
A summary of significant accounting policies follows:
Basis of Presentation and Use of Estimates
The Company's financial statements are prepared in accordance with United States generally accepted accounting principles. Those generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. The Company had no cash equivalents as of December 31, 2023, and 2022.
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Franchisee Receivable
Timing of revenue recognition may be different from the timing of invoicing to customers. The Company records an accounts receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing. Management evaluates individual customers' receivables considering their financial condition, credit history and current economic conditions. Accounts receivable are written off if deemed uncollectible and recoveries of accounts receivable previously written off are recorded as income when received. The Company did not have any allowance for doubtful accounts as of December 31, 2023, and 2022 and did not charge-off any accounts receivable during the years ended December 31, 2023, 2022 and 2021.
Property, Plant & Equipment
The Company has adopted ASC 360 – Property, Plant and Equipment. Property and equipment are stated at historical cost. Depreciation is provided using straight-line method based on the estimated useful lives of the related assets (generally three to seven years). The Company had no property, plant & equipment at December 31, 2023, and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the company prepares its financial statements in accordance with United States generally accepted accounting principles. These principles require Hyper Kidz's management to make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also extend to the disclosure of any contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. This means that the financial statements are not purely based on hard numbers but involve some level of subjective judgment by the management. As a result, the actual financial results of Hyper Kidz could potentially differ from these initial estimates.
In evaluating individual customer's receivables, Hyper Kidz's management considers their financial condition, credit history, and current economic conditions. Accounts receivable are written off if deemed uncollectible. Recoveries of accounts receivable previously written off are recorded as income when received. The company did not have any allowance for doubtful accounts as of December 31, 2023, and 2022 and did not charge-off any accounts receivable during the years ended December 31, 2023, 2022 and 2021.
For property and equipment, Hyper Kidz follows ASC 360 standards, stating these assets at historical cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which typically range from three to seven years. As of December 31, 2023, and 2022, the company had no property, plant, and equipment.