When did Aunt Millies Bakeries discontinue hedge accounting for interest rate swaps?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
In February 2023, the Company discontinued hedge accounting as the previous interest rate swap agreements entered into in 2022 and 2021 were amended or terminated and the interest rates swaps entered into in 2023 were not effective in offsetting changes in cash flows of the floating rate debt obligations. The Company will carry the derivative at fair value in the consolidated financial statements, recognizing changes in fair value in current period income in the consolidated statements of operations.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, the company discontinued hedge accounting in February 2023. This decision was made because previous interest rate swap agreements entered into in 2021 and 2022 were either amended or terminated. Additionally, the interest rate swaps initiated in 2023 were deemed ineffective in offsetting changes in the cash flows associated with 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 these derivatives are recognized as current period income within the consolidated statements of operations.
For a prospective franchisee, this accounting change is unlikely to have a direct impact on their day-to-day operations. However, it reflects Aunt Millies Bakeries' financial strategies for managing interest rate risks and provides insight into how the company accounts for these financial instruments. Understanding these strategies can help franchisees assess the overall financial health and risk management practices of Aunt Millies Bakeries.