What accounting standard does Apricot Lane apply to determine if an arrangement is a lease?
Apricot_Lane Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company applies Accounting Standards Codification (ASC) 842, Leases, in determining whether an arrangement is or contains a lease at the lease inception. An arrangement is considered to include a lease if it conveys the right to control the use of identified property or equipment for a period in excess of twelve months in exchange for consideration. The Company defines control of the assets as the right to direct the use of the identified assets. Right-of-use (ROU) assets represent the Company's right to use leased assets over the term of the lease. Lease liabilities represent the Company's contractual obligation to make lease payments and are measured at the present value of the future lease payment over the lease term using a risk-free rate as permitted under ASC 842. ROU assets are calculated as the present value of the future lease payments adjusted by any deferred rent liability and lease incentives.
Source: Item 23 — RECEIPTS (FDD pages 51–222)
What This Means (2025 FDD)
According to Apricot Lane's 2025 Franchise Disclosure Document, the company applies Accounting Standards Codification (ASC) 842, Leases, to determine whether an arrangement is or contains a lease at the lease inception. An arrangement is considered a lease if it conveys the right to control the use of identified property or equipment for a period exceeding twelve months in exchange for consideration. Apricot Lane defines control of the assets as the right to direct the use of the identified assets.
Right-of-use (ROU) assets represent Apricot Lane's right to use leased assets over the lease term. Lease liabilities represent the company's contractual obligation to make lease payments and are measured at the present value of the future lease payments over the lease term using a risk-free rate as permitted under ASC 842. ROU assets are calculated as the present value of the future lease payments adjusted by any deferred rent liability and lease incentives.
For a prospective Apricot Lane franchisee, this means that when evaluating potential store locations and lease agreements, the determination of whether the lease meets the criteria defined by ASC 842 is important. Understanding how Apricot Lane accounts for leases will help franchisees better assess their financial obligations and the value of the leased assets. Franchisees should consult with their own financial advisors to fully understand the implications of ASC 842 on their specific circumstances.