Regarding Ledgers' financial statements, what specific balances were included for a terminated franchise agreement during the year ended December 31, 2023?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
F CREDIT RISK
The Company maintains its cash in financial institutions insured by the Federal Deposit Insurance Corporation. Deposit accounts, at times, may exceed federally insured limits.
NOTE 8 - COMMITMENT AND CONTINGENCY
The Company is subject to various claims and legal proceedings that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.
NOTE 9 - PRIOR
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, during the year ended December 31, 2023, the company's financial statements initially included balances related to a terminated franchise agreement. These balances consisted of a note receivable of $752,118 and deferred revenue of $533,000. However, these amounts were not properly written off at the time of termination.
In 2024, Ledgers identified this error and restated its financial statements to correctly reflect the termination. This restatement involved recording $219,118 in bad debt expense for the year ended December 31, 2023. Additionally, the note receivable of $752,118 and the deferred revenue balance of $533,000, both as of December 31, 2023, were removed from the financial statements.
This correction ultimately decreased members' equity as of January 1. For a prospective franchisee, this highlights the importance of accurate financial reporting and the potential for errors to impact the financial statements. It also demonstrates Ledgers' commitment to correcting errors when they are identified, even if it requires restating prior financial statements.