What method did 1 800 Packouts use when adopting ASC 326 and its related amendments?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
In relation to these acquisitions, the Company elected to early adopt Accounting Standards Update 2021-08, Business Combinations (ASU 2021-08). ASU 2021-08 allows a Company to recognize and measure contract assets and contract liabilities in accordance with ASC 606, Revenue from Contracts with Customers. Accordingly, the contract assets and contract liabilities were recognized at carryover value from the predecessor, rather than at fair value.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document does not provide information on the method 1 800 Packouts used when adopting ASC 326 and its related amendments. The document discusses the company's early adoption of Accounting Standards Update 2021-08, Business Combinations (ASU 2021-08) in relation to acquisitions made in 2022. This update allows the company to recognize and measure contract assets and contract liabilities in accordance with ASC 606, Revenue from Contracts with Customers, recognizing these assets and liabilities at carryover value rather than fair value.
While the FDD details the early adoption of ASU 2021-08 and its impact on recognizing contract assets and liabilities during acquisitions, it does not mention the adoption of ASC 326. This accounting standard relates to financial instruments and credit losses, which is distinct from business combinations and revenue recognition covered by ASU 2021-08 and ASC 606.
A prospective franchisee should directly ask 1 800 Packouts about their specific method for adopting ASC 326, including the date of adoption and any significant impacts on their financial statements. Understanding the franchisor's approach to accounting standards can provide valuable insights into their financial practices and risk management.