For Management Recruiters, how are the assets and liabilities of a discontinued operation held-for-sale measured?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
Company-owned offices that have been disposed of by sale, disposed of other than by sale, or are classified as held-for-sale are reported separately as discontinued operations. In addition, a newly acquired business that on acquisition meets the held-for-sale criteria will be reported as discontinued operations. Accordingly, the assets and liabilities, operating results, and cash flows for these businesses are presented separate from our continuing operations, for all periods presented in our consolidated financial statements and footnotes, unless indicated otherwise. The assets and liabilities of a discontinued operation held-for-sale are measured at the lower of the carrying value or fair value less cost to sell.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, company-owned offices that have been disposed of by sale, disposed of other than by sale, or are classified as held-for-sale are reported separately as discontinued operations. This also applies to newly acquired businesses that meet the held-for-sale criteria upon acquisition. The assets and liabilities, operating results, and cash flows for these discontinued operations are presented separately from Management Recruiters' continuing operations in the consolidated financial statements and footnotes for all periods presented, unless otherwise indicated.
Specifically, the assets and liabilities of a discontinued operation held-for-sale are measured at the lower of their carrying value or their fair value less the cost to sell.
For a potential Management Recruiters franchisee, this means that if the franchisor decides to discontinue an operation and classify it as held-for-sale, the value of its assets and liabilities will be assessed based on whichever is lower: the value recorded on the books (carrying value) or the estimated selling price minus any costs associated with the sale. This accounting treatment ensures that the financial statements accurately reflect the potential loss from selling the discontinued operation. This is a standard accounting practice to provide a realistic view of the company's financial position when disposing of a business segment.