When did Aunt Millies Bakeries discontinue hedge accounting for its interest rate swap agreements?

According to the 2025 Aunt Millies Bakeries Franchise Disclosure Document, the company discontinued hedge accounting for its interest rate swap agreements in February 2023. This decision was made because the previous interest rate swap agreements entered into in 2021 and 2022 were either amended or terminated. Additionally, the interest rate swaps entered into in 2023 were deemed ineffective in offsetting changes in cash flows related to the company's floating rate debt obligations.

Following this change, Aunt Millies Bakeries carries the derivative at fair value on its consolidated financial statements. Any changes in the fair value of the derivative are recognized as current period income in the consolidated statements of operations. This means that the value of these financial instruments is adjusted to reflect current market conditions, and any gains or losses are immediately reflected in the company's reported income.

For a prospective franchisee, this information is relevant because it provides insight into Aunt Millies Bakeries' financial risk management strategies. Understanding how the company manages its interest rate exposure can help franchisees assess the overall financial health and stability of the franchisor. While franchisees are not directly involved in these specific financial instruments, the franchisor's financial stability can impact the support and resources available to franchisees.