Md. Code Regs. 02.02.08.13

Current through Register Vol. 51, No. 22, November 1, 2024

Section 02.02.08.13 - Financial Statements

A. Scope. The following financial statements shall be prepared in accordance with this regulation:

(1) A financial statement required by the Maryland Franchise Law;

(2) A financial statement required by any regulation adopted under the Maryland Franchise Law, including the MFOC; and

(3) A financial statement used by or on behalf of a franchisor in connection with an offer, sale, or purchase of a franchise in Maryland.

B. Standards.

(1) A financial statement specified in §A of this regulation shall be prepared in accordance with generally accepted accounting principles.

(2) Financial statements of a franchise offering, for which registration is required under the Maryland Franchise Law, shall be audited and certified by an independent certified public accountant, except that this requirement:

(a) Does not apply to interim financial statements unless otherwise required by the Commissioner in a particular case; and

(b) May be waived by the Commissioner for good cause shown when a waiver would not be inconsistent with the purposes of the Maryland Franchise Law or contrary to the public interest or the protection of prospective franchisees.

C. Content of Financial Statements.

(1) The financial statements that accompany an application for initial or renewal registration shall include comparative:

(a) Balance sheets as of the end of the franchisor's last 2 fiscal years before the application date; and

(b) Statements of operations, or owners' equity, and of cash flows for the last 3 fiscal years before the application date.

(2) If the date of the most recent audited financial statements precedes the date of the application by more than 90 days, the franchisor shall also include:

(a) An interim balance sheet as of a date within 90 days of the date of the application; and

(b) Statements of operations for the period from the date of the most recent audited statement to the date of the interim balance sheet.

(3) If a franchisor owns, directly or indirectly, a controlling interest in any other corporation or entity, the financial statements filed by the franchisor shall reflect, on a consolidated basis, the financial condition of the franchisor and each of the entities controlled by it.

D. Disclosure. A presentation of unaudited financial statements shall be accompanied by the following written disclosure, immediately adjacent to the financial statements:

These Financial Statements Have Been Prepared Without An Audit. Prospective Franchisees Or Sellers of Franchises Should Be Advised That No Independent Certified Public Accountant Has Audited These Figures Or Expressed An Opinion with Regard to their Content Or Form.

E. Failure to Submit Financial Statements. If a franchisor fails to submit audited financial statements which comply with the requirements of this regulation as part of an application for registration or renewal of registration, the Commissioner may deny the application.

Md. Code Regs. 02.02.08.13

Regulation .13 adopted effective April 15, 1991 (18:7 Md. R. 770)
Regulations ______ .13 under COMAR 02.02.10 repealed effective January 17, 1994 (21:1 Md. R. 27)
Regulations .13 adopted effective January 17, 1994 (21:1 Md. R. 27)